Estate Planning

REVOCABLE VS. IRREVOCABLE TRUSTS

Estate Planning Trusts can be split into two categories: revocable and irrevocable.

Revocable Trusts:

A Revocable Trust allows the Trustee to maintain control over their assets over their lifetime and can be amended or revoked at any time.  For example, if you go through a significant life change, like divorce, and you need to change your Trust, you can do so.

A Revocable Trust can change as your life changes because you can add or remove assets throughout your lifetime.  This does not become permanent until you pass away.  With a Revocable Trust, you can name yourself as Trustee to manage the Trust while you are living and name a Successor Trustee to continue managing the Trust if you ever become incapacitated in any way.

If the Revocable Trust is funded correctly, it does not pass through probate court.  This means that the Trust’s assets do not need to go through the long, exhausting court process.  In addition, probate is a public process, so the Trust allows for greater privacy for you and your family.  It is also more difficult for creditors to make a claim against the estate if there is a Trust in place.

Irrevocable Trusts:

Unlike a Revocable Trust, you cannot amend or terminate an Irrevocable Estate Planning Trust.  If you place anything into the Trust, you cannot take it back out.

The main benefit of an Irrevocable Trust is that it can be used as protection against creditor claims, Medicaid, and more. 

An Irrevocable Trust is also beneficial if you have a large estate and need to remove certain assets from your estate to avoid estate taxes.

Estate planning involves setting up a plan that establishes who will eventually receive your assets after your passing. It also establishes how you want your affairs to be handled in the event you are unable to handle them for any reason. 

It’s a complicated process, and it can feel overwhelming.  There are many components to Estate Planning, and while there is a common misconception that it’s just about your finances, the truth is there is a lot more involved. The following are some of the circumstances in which Estate Planning can assist you:

  • If you would like your assets passed to family members and loved ones without going through probate court and incurring Probate fees.

  • If you would like to create a plan for managing your assets in the event that you ever become incapacitated.

  • If you have family members with special needs and would like to set money aside for them for their care and support.

  • If you would like to set inheritance requirements for beneficiaries.  (For example, the beneficiary must reach the age of 25 before receiving their inheritance, providing money for college or down payment on a house).

  • Maintaining assets and support to care for minor children when you pass away.

  • Designating a guardian for your minor children should you pass before they are adults.

  • Creating a plan to reduce estate taxes.

SPECIAL TYPES OF
ESTATE PLANNING TRUSTS

Beyond Revocable and Irrevocable Trusts, there are various other types of Estate Planning Trusts you may wish to consider:

  • This type of Trust is used to protect your assets from any creditor claims that may arise in the future.  It is usually set up while you are still living to protect your existing assets when you suspect that creditors may try to make claims to those assets against your debts.  Once the risk of creditors taking your assets has passed, the assets are then taken out of trust and control of them is restored to you.

  • There are different types of charitable trusts. The most common type is called a “Remainder Charitable Trust”.  A remainder charitable trust is where you set up a trust and transfer the property that you want to donate to charity in the trust.  Your charity of choice is then named as the trustee of the trust. The charity you choose must be an IRS-recognized charity.  The charity then invests or manages the property in the trust.

  • A Marital Trust is typically created by one spouse and benefits the other if one spouse passes away.  After the first spouse dies, any assets in the Trust are passed to the surviving spouse.  Using the Trust to give the assets avoids paying estate taxes for the surviving spouse’s lifetime.  However, when the surviving spouse passes, the heirs may have to pay estate taxes.

  • A Special Needs Trust can be beneficial if you have a family member with special needs that you need to care for financially.  The Trust can assist financially without compromising your loved one’s government benefits.  The money in the Estate Planning Trust can be used for daily needs, medical care, and more.