What is the Difference Between Trusts?
The biggest difference between a revocable trust or an irrevocable trust is the ability to change your trust document. An irrevocable trust cannot be changed once it is created except for as allowed by the trust. Beneficiaries cannot be changed in an irrevocable trust and assets cannot be added or taken out of the trust. Under California Probate Code §15403, the terms of an irrevocable trust may only be changed if all beneficiaries consent and petitions the court to change the terms. To find out more give us a call toll free at 1-877-963-9543 and get the personal service you deserve from out trust attorneys.
A revocable trust is more flexible. The settlor (person creating and transferring property into the trust) can change the terms of the trust during his or her lifetime or even revoke the trust and take back the property that was included in the trust. In a revocable trust the settlor can be the trustee and have control over the trust. He or she can designate successor trustees to administer the trust in the event that he or she becomes incapacitated. Once the settlor dies, the revocable trust becomes irrevocable.
One of the biggest drawbacks of an irrevocable trust is the lack of flexibility. However, irrevocable trust are great tools to protect assets. Once an irrevocable trust is created, the assets in the trust are no longer an asset to the settlor and therefore cannot be reached by creditors. Another advantage of an irrevocable trust is that it may provide more tax savings. Since the trust no longer belongs to the settlor it is exempt from estate taxes.
So Revocable Trust vs. Irrevocable Trust? Most trusts created by trust lawyers are in the form of a revocable trust. Settlors want to be able to control the assets in the trust and be able to easily change the trust when it becomes necessary to do so if circumstances in their life change such as changing beneficiaries or adding assets to the trust. Irrevocable trusts by their definition are not revocable and therefore unchangeable. What if you changed your mind later and wanted the asset to be used for something else or to be given to someone else because your original beneficiary is no longer in your good graces? You would not be able to do anything in the irrevocable trust and that loss of control is what steers a lot of settlors to revocable trusts.
Which type is really dependent upon what you have going on in your life. Are you a new homeowner just starting out with a single piece of property? Or are you approaching retirement age and need to plan for your healthcare needs and you family? As your life changes sometimes your long term plan and trust will have be changed with it.
