What Are The Differences Between A Revocable And Irrevocable Trust?
One of the best ways to provide for your loved ones after your passing is through the establishment of a trust. However, there are two main types of trusts, revocable and irrevocable, that each have its own set of benefits and drawbacks. The type of trust that is established can have a substantial impact on your life and your finances, which is why it is important to have an experienced estate planning attorney go over your options with you before making this decision. At Bubley & Bubley, P.A., our experienced Tampa estate planning lawyers are here to help. To learn more, call or contact our office today to schedule a consultation.
Modification of Trust Terms
One of the biggest differences between revocable and irrevocable trusts is the modification of trust terms. With a revocable trust, the terms can be changed at any time between the origination of the trust and the trust creator’s passing. This includes who is named as beneficiaries as well as the terms that dictate when or how trust assets may be accessed. With an irrevocable trust, once the terms are set the creator of the trust cannot modify the terms. This applies even if they change their mind about how to access the trust assets or wish to add or remove someone from the beneficiaries list.
Another substantial difference in trust types is the property ownership of the assets of the trust. In a revocable trust, the creator of the trust still retains ownership of the trust assets. As such, the creator can add or remove their assets from the trust at any time. With an irrevocable trust, once the assets are placed in the trust the creator no longer owns them – they become property of the trust.
A third difference between revocable and irrevocable trusts is asset protection. With a revocable trust, there is no asset protection from creditors if the creator of the trust has debts. This is because the trust creator still technically owns the property in the trust, so therefore it is accessible by creditors. However, with an irrevocable trust the assets placed in the trust are protected from creditors because the trust creator no longer technically owns those assets. As such, they are not accessible if the trust creator has debts.
Finally, there are differences in tax benefits between revocable and irrevocable trusts. Because of the changing nature of a revocable trust, there are no tax benefits to establishing this type of trust. This avoids having a trust creator place all their assets in trust to avoid taxes to just take them out again. However, an irrevocable trust does provide substantial tax benefits, as the creator of the trust no longer owns the assets and therefore is not responsible for them in their taxes.
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Do you have more questions about establishing a trust? If so, call or contact Bubley & Bubley, P.A. in Tampa today to learn more.