You’ve probably also come across information about irrevocable trusts, with all of their inflexibility and restrictions, and it’s made you wonder why anyone would ever use an irrevocable trust when the revocable trust has so many more advantages.
Why Revocable Trusts Are Popular
The revocable trust offers a lot of benefits. For example, when a trust is revocable, the grantor (also known as the creator) of the trust can change any of its terms. They can also change the beneficiaries and the trustee.
Additionally, the grantor can also continue putting assets into the trust and taking them out of the trust, too. In fact, the grantor can even terminate the trust if they want – this is where the “revocable” comes from.
There are other benefits, too. The revocable trust is a good estate planning tool for helping your heirs avoid probate on your death, since it’s the trust that owns the assets in the trust, and not you. And since they don’t have to go through probate, which is a public court procedure, there’s more privacy for everyone involved, too.
The Inflexibility of Irrevocable Trusts
The irrevocable trust, on the other hand, offers none of the flexibility of the revocable trust. Once you create an irrevocable trust, you can’t change any of its terms. For example, you can’t decide at a later date to change the people you’ve designated as the beneficiaries of the trust.
And whatever assets you decide to transfer into the trust stays in the trust. This means that, unlike with a revocable trust, as the grantor, you won’t have any control over your assets once they go into your irrevocable trust.
“Irrevocable” also means you can’t terminate the trust, either. All these characteristics of the irrevocable trust add up to a great deal of inflexibility and make it easy for most people to choose revocable trusts for their estate plans over an irrevocable trust.
Still, There’s a Time and Place for Irrevocable Trusts
But there are certain situations where you might want to use an irrevocable trust rather than its more popular cousin. These situations include the following:
- For Medicaid purposes. Such trusts help individuals to retain eligibility for a program like Medicaid. Setting up an irrevocable trust for this purpose is complex, and you should always consult with an experienced estate planning attorney.
- For the purpose of minimizing estate taxes. For some people, minimizing estate taxes is an important goal. Again, however, there’s a complexity to setting up an effective irrevocable trust in this situation, and you should speak with an attorney who’s experienced in this area.
- To protect your assets against creditors. The irrevocable trust can be a good estate planning vehicle if you’re worried about creditors — either yours or your beneficiaries’ — being granted access to your assets.
Talk with a Springfield Estate Planning Attorney Today
It’s important to talk to an attorney with experience in estate planning if you’re thinking of setting up an irrevocable trust, no matter what your purpose for the trust is. Not only are these trusts irrevocable, but an error in setting up the trust can mean it’s no longer valid for your desired purpose. Speak to a Springfield estate planning attorney at Parks & Jones today for all of your estate planning needs.