Should You Have a Revocable or Irrevocable Trust?

A trust is one of the most widely used estate planning documents. Georgians use trusts for a variety of estate planning benefits; perhaps the most popular benefit is the ability of the grantor’s (trust creator’s) family to avoid probate. Probate is the long and somewhat-expensive legal process of closing a decedent’s estate. 

Not all trusts are created equal. Estate planners have many different types of trusts at their disposal, and the type that is best for you depends on your specific goals. However, most trusts are classified as either revocable or irrevocable. The information provided below should help you decide which is more likely to accomplish your estate planning goals. 

Benefits of Revocable Trusts

Revocable trusts allow the grantor to modify the trust’s terms or revoke it altogether as long as the grantor is alive and has the capacity. This can be useful if your goals or circumstances significantly change. Even though funding the trust means placing your assets inside the trust and formally changing legal ownership of the assets to the trust, you can undo those actions with a revocable trust.

In other cases, grantors of revocable trusts wish to remove or add a trustee or beneficiary. Avoiding probate and maintaining privacy are two benefits of revocable trusts. Once the grantor passes away, the revocable trust becomes irrevocable. 

Benefits of Irrevocable Trusts

The same fundamental benefits of trusts—avoiding probate, maintaining privacy, and having greater control over asset distribution—are provided with irrevocable trusts. The main downside of irrevocable trusts is that they cannot be altered or revoked except in rare circumstances. 

So, why would someone choose an irrevocable trust over a revocable trust? Typically, there are two main reasons: asset protection and tax avoidance. Irrevocable trusts can help grantors avoid estate taxes because assets owned by irrevocable trusts are usually not considered part of the grantor’s taxable estate. Conversely, assets owned by revocable trusts are usually considered part of the grantor’s taxable estate because the grantor still has significant control over the assets. 

Irrevocable trusts can also help with asset protection because assets held in irrevocable trusts are usually insulated from creditors. So, for example, a judgment against a business owner cannot be satisfied by dipping into assets held in an irrevocable trust. 

Consult a Well-Rounded Attorney to Help Craft Your Estate Plan

Choosing the best trust for your estate plan should only be done after careful consideration of your circumstances and long-term goals. The Anderson Firm provides strategic estate planning services in addition to quality legal counsel for business owners. Before deciding on an attorney, consider choosing one who can help make your estate plan and protect your business assets at the same time.

Click here to book your consultation with The Anderson Firm today.

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