Revocable versus Irrevocable Trusts
January 31, 2020
When it comes time to plan one’s estate, it is essential to understand how trusts work. Depending on one’s goals and the number of assets involved, there are different choices to meet the needs and protect the owner and beneficiaries in the long term. Most people understand what a will is, but trusts can be a bit more complicated. They can supplement or replace wills and manage assets while the owner is alive or after their death. Trusts are designed to manage distribution of the property by transferring its obligations and benefits to others. Two of the main types are revocable and irrevocable trusts.
What is a Revocable Trust?
Also called living trusts, these are legal tools created while the trustmaker is still living. They accommodate investments, business assets, and real property, and may be changed or revoked completely. One of the benefits of revocable trusts is that they transfer the assets before death, and this helps avoid probate. However, they are not useful for protecting assets from creditors because they may still be able to access them.
Some business owners put their companies in revocable trusts but again, this does not offer protection from creditors. It is also important to know that larger revocable trusts often need a third-party trustee to manage the assets and tax implications. When an individual creates a living revocable trust and later passes away, this trust turns into an irrevocable trust.
What is an Irrevocable Trust?
Irrevocable can be defined as permanent, and this applies to irrevocable trusts. They are used to ensure that the deceased’s wishes are carried out and their loved ones are taken care of and cannot be changed or revoked once they are created without permission of the designated trustee and all the beneficiaries. Irrevocable trusts also help guard the assets from beneficiaries who try to spend them too quickly or fight over them. These trusts are more effective for protecting funds from creditors.
Other Types of Trusts
In addition to revocable and irrevocable trusts, there are other categories of trusts to meet the needs of asset owners. Charitable trusts are often created to reduce or avoid gift and estate taxes, and benefit chosen charities. Asset protection trusts are used to protect the owner’s assets from possible future creditor claims, and are set up in countries that are outside of the U.S.
Constructive trusts are established by a court, and are determined by various situations and facts; even if a formal trust was never made, the court might decide that the asset owner intended that the property be given to a certain individual or organization. Other types of trusts include spendthrift and special needs trusts.
Brooklyn Elder Law Lawyers at Korsinsky & Klein, LLP Work to Ensure Your Final Wishes are Carried Out
Although no one likes the idea of planning for their eventual passing, planning to protect your assets and beneficiaries is the responsible and caring way to handle things. A knowledgeable Brooklyn elder law lawyer at Korsinsky & Klein, LLP can help you plan. Call us today at 212-495-8133 or contact us online for an initial consultation. With offices in Brooklyn, New York, and Lakewood, New Jersey, we represent clients throughout Manhattan, Long Island, and Westchester, New York.