Chances are you have been busy either with your corporate responsibilities or in building a successful family business and you continue to accumulate assets.
Perhaps you are not far from retirement and want to take a serious look at estate planning. Trusts are among the many helpful tools, but which is best for your circumstances, revocable or irrevocable?
As its name implies, the revocable trust allows you to make changes as often as you wish. There are no tax advantages to this kind of trust. The main reason for establishing a revocable trust is to have a receptacle set up and ready to receive assets if you can no longer handle the management of your own affairs.
Upon your death, your trustee will manage those assets according to the instructions you provided. At that time, a revocable trust becomes an irrevocable trust and, as a rule, the assets will not have to pass through probate.
People who are very well off often opt for the irrevocable trust because it affords tax advantages. However, this kind of trust is also a good choice for those who want protection from professional liability or who wish to ensure financial support for an elderly or disabled loved one.
An irrevocable trust can also serve to protect assets from creditors, but it could appear fraudulent unless you place the assets in trust long before any credit crisis appears.
Key points to consider
Base the kind of trust you create on the amount of control you need. An irrevocable trust is often preferable to people who understand that the benefits are not immediate but occur as time goes on. However, because life brings about major changes, many people find that a revocable trust suits their needs perfectly. Both are examples of living or inter vivos trusts, meaning that you create one or the other during your lifetime.