Simply put, a trust is a financial agreement among three people: the grantor (who creates the trust), the trustee (who manages the trust), and the beneficiary (who receives what’s put in the trust). Trusts can either be revocable or irrevocable. An attorney can help you decide which will better fit with your estate-planning needs, but it’s important you understand what purpose each serves.
As its name implies, a revocable living trust can be altered or revoked entirely after its creation. Additionally, property or financial assets that are put into a revocable trust:
- Remain the property of the grantor, the individual who creates the trust
- May be charged estate taxes
A revocable trust provides flexibility for the grantor if he isn’t entirely certain what assets he wants kept in trust or wants to plan for a scenario in which he becomes mentally incapacitated. Another advantage of a revocable trust is that it avoids probate and public visibility after death. In short, the grantor can maintain control over his assets in a revocable trust while still reaping some benefits.
An irrevocable trust is created with permanency in mind; after creation, an irrevocable trust cannot be altered. Additionally, revocable trusts will:
- Transfer legal ownership of assets from the grantor to the trust itself
- Avoid probate
- Reduce estate taxes
- Protect assets
After the creator of an irrevocable trust passes away, the trustee oversees the transfer of ownership from the trust to its beneficiary. Because the grantor no longer legally owns assets put into an irrevocable trust, these assets are not calculated in the mass value of the deceased’s estate—which results in great tax savings, asset protection, and discretion.
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If you’re considering how to build your estate plan and whether you should create a trust, consult with an attorney who can give you sound guidance. The legal team at Tavss Fletcher can review your estate with you, listen to your concerns, and help you build a plan that works for your estate. To get started, fill out the online contact form on our website today.