Using the right estate planning tools is an important part of providing for your loved ones. One of the most common options used by people from all walks of life is the trust.

There are two different types of trusts: revocable and irrevocable. The difference between the two is exactly as you’d guess based on their names. One is revocable and the other is not.

Both types of trusts offer benefits and drawbacks.

What do you need to know about revocable and irrevocable trusts?

Revocable Trust

A revocable trust can be revoked by the grantor. The primary benefit is that the grantor’s wishes are implemented in the case of incapacitation. This type of trust also helps families avoid the probate process in many cases.

However, despite their benefits, revocable trusts aren’t ideal for everyone. In part, this is because there are no tax benefits provided by this type of trust. There is also no creditor protection. To gain these benefits, you’ll need to sacrifice your right to modify the trust. The law does not allow for people to “hop in and out” of the trust and still gain the asset protection or tax reduction found in irrevocable trusts.

Irrevocable Trust

So does this mean an irrevocable trust is better for everyone?

No.

If your priority is tax and asset protection, an irrevocable trust could be the best option. Most estate planning professionals view the exemptions from some tax laws and the ability to retain assets in a trust for generations as two of the main benefits of the irrevocable trust.

This type of trust can also protect your estate from creditors because assets are owned in the name of the trust, as opposed to your name. Even if the asset is not entirely protected, it creates a legal hurdle for creditors and makes it tougher for them to seize a trust-protected asset.

However, as mentioned before, these protections mean giving up control of your assets. Many people don’t like creating a restriction on their assets and only having the ability to access them at the discretion of a third party. It puts you at the mercy of the trustee.

Note, there are ways to modify an irrevocable trust to make it less irrevocable. In some cases, there’s a middle ground that provides more protection than you’d get with a traditional revocable trust.  But it doesn’t restrict you as much as a traditional irrevocable trust.

Determining which type of trust is right for you depends on your goals and what you’d like to protect against. There are also additional estate planning tools, including powers of attorney, pour-over wills, and healthcare directives that can provide additional layers of protection.

An Estate Planning Attorney Helps You Decide Which Planning Tools are Right for You

Working with an experienced estate planning attorney helps you understand the pros and cons of both types of trusts and determine which is best for you and your family. Together, you’ll evaluate your estate planning goals and priorities and review the various tools available in your case.

Determining whether a revocable or irrevocable trust is right for you, or if an entirely different estate planning tool would be better, requires the experienced guidance of an attorney. For more information or to schedule a consultation to discuss your estate, contact Frese Whitehead & Anderson, P.A., at 321-984-3300 for more information.