A Basic Overview of Revocable and Irrevocable Trusts
Revocable and irrevocable trusts are common types of legal arrangements used in estate planning, each with their unique characteristics and purposes. Here’s a basic overview of both:
Revocable Trust (Living Trust):
- Ownership Control: With a revocable trust, you (the grantor) maintain full control and ownership of the assets you place into the trust during your lifetime.
- Flexibility: As the grantor, you can make changes to the trust, amend or revoke it entirely at any time during your lifetime, which is why it’s often referred to as a “living trust.”
- Probate Avoidance: One of the primary benefits is that assets held in a revocable trust typically avoid probate upon your death. This can result in a faster and more private distribution of assets to beneficiaries.
- Incapacity Planning: Revocable trusts are useful for planning during your incapacity. If you become unable to manage your affairs, your chosen successor trustee can step in to manage the trust assets on your behalf.
- Ownership Surrender: In contrast, an irrevocable trust involves permanently surrendering control and ownership of assets placed into the trust. Once established, you typically cannot make changes to the trust without the consent of the beneficiaries.
- Asset Protection: Irrevocable trusts can offer asset protection benefits, shielding assets from creditors, lawsuits, and potential estate taxes. These trusts are often used for this purpose.
- Tax Planning: Irrevocable trusts are also employed for tax planning. Certain types, such as irrevocable life insurance trusts (ILITs) or charitable remainder trusts (CRTs), can provide tax advantages.
- Medicaid Planning: Irrevocable trusts can be part of Medicaid planning strategies to help individuals qualify for long-term care benefits while preserving some assets for heirs.
Work with an Experienced Washington Estate Planning Attorney
The key distinction between a revocable trust and an irrevocable trust lies in control and flexibility. A revocable trust allows the grantor to retain ownership and make changes, while an irrevocable trust entails a permanent surrender of control and is typically used for asset protection, tax planning, or specific long-term goals. The choice between the two depends on your specific goals and circumstances. Call Gregorek & Associates at 425-284-3450 or fill out our contact form and we will be in touch to schedule a meeting. We can help you determine which type of trust, if any, best aligns with your needs and objectives.