Revocable and irrevocable trusts are essential for estate planning purposes. It’s important to note, however, that they serve very different purposes and are used to accomplish differing goals. This article touches on a few of the benefits – and limitations – of each.
When you set up a revocable trust, you’ll continue to have access to the funds in the trust while you are alive. This means you’ll be able to spend money on the things you need, including long-term health care. In an irrevocable trust, the money is no longer available to you for any purpose.
A Revocable Trust Can Help You Plan for Contingencies
Many people use a revocable trust to set up plans for contingencies. An example of such a contingency plan would be what to do if you became incapacitated. A trust allows for seamless handling of the assets of the trust, without the necessity of court intervention to determine who will make decisions. This saves time and money. It also protects your privacy and significantly reduces the potential for family squabbles about who is best able to make the decisions about the trust itself.
An Irrevocable Trust Can Ensure Support of a Loved One
If you have a child who is disabled, an irrevocable trust can provide support. Money is immediately transferred to the trust, and cannot be transferred back to the trustor. A trustee makes determinations about how to handle money to further the goals of the trust, which in this case, would be for the ongoing care of your disabled child.
Using an Irrevocable Trust Can Help You Avoid Capital Gains Taxes
Many people don’t realize this, but there are ways that you can transfer assts into an irrevocable trust so that capital gains taxes can be avoided. This alone is not a good reason to transfer funds into an irrevocable trust, however. Many people will never face capital gains taxes, and depending on the circumstances, a gift tax may still be due. An estate planning attorney can help you decide whether transferring assets into an irrevocable trust is a smart financial decision in these types of situations.
Protect Your Family with Irrevocable Differences
At Doane & Doane, we pride ourselves on our personalized legal services. We recognize that each family is different, and that each family’s estate planning needs will also be different. Whether your family would benefit from a revocable or irrevocable trust is a question only you can answer. We highly encourage you to give careful consideration to both the pro’s and con’s of each before making a final decision. At Doane & Doane, our legal team has extensive experience in estate planning and is here to help you make informed decisions about your wealth management for generations to come. Contact us today at (561) 656-0200 to discuss your family’s needs.