When you are thinking about creating your estate planning documents, one of the questions you have might be about inter vivos or living trusts.
Both revocable and irrevocable trusts fall into this category. Which one is right for you?
Advantages of the revocable trust
Put simply, a revocable trust is one you can change or revoke entirely at any time. You can rewrite the terms to keep up with significant changes in your life. A revocable trust will allow you to have as much or as little control over the assets as you wish. There are no tax savings associated with this kind of trust as there are with an irrevocable trust. However, this may be a good choice if you want a place to store and protect your assets for a trustee to manage after you pass away. Properly set up, the revocable trust will afford more privacy for your family than the probate process, and it will become irrevocable upon your death.
Choosing an irrevocable trust
Although it is necessary to give up control to a trustee, a wealthy grantor may opt for an irrevocable trust because there are tax advantages. The assets that go into this kind of trust can only be those that are neither jointly owned, such as real property, nor those for which you named a direct beneficiary, as in a retirement account. If you should become incapacitated, your trustee can step in to manage the trust without the need for a court order. Confirmation from a physician attesting to your inability to deal with trust matters would probably be the only requirement needed for your trustee to take over.
A matter of control
As compared to a testamentary trust, which you can create through a will and which only becomes active after your death, both the revocable and irrevocable trusts will be up and running during your lifetime. Remember that the amount of control you will have is one of the main considerations in choosing which kind of trust is best for you and your family.