Greetings from your trusted team at Peabody Law Firm, Southlake, TX! Today, we’re focusing on a vital aspect of estate planning: the difference between revocable and irrevocable trusts.
By understanding their distinct characteristics, you can make an informed decision on the type that best aligns with your estate planning goals.
Revocable Trusts: Flexibility and Control
Revocable trusts, often called living trusts, are flexible estate planning tools that can be changed or terminated during the trustor’s lifetime.
Here are their main features:
Control:
The trustor retains control over assets and can amend, revoke, or terminate the trust at any time.
Probate Avoidance:
Assets within a revocable trust bypass probate, speeding up asset distribution to beneficiaries and preserving privacy.
Incapacity Planning:
If the trustor becomes incapacitated, a designated successor trustee can manage the trust’s assets.
However, the assets within a revocable trust are still considered part of the trustor’s taxable estate, and they do not provide protection from creditors.
Irrevocable Trusts: Asset Protection and Tax Benefits
Irrevocable trusts, once established, cannot be altered or terminated without the consent of the beneficiaries.
Here are their key attributes:
Asset Protection:
Assets placed in an irrevocable trust are no longer part of the trustor’s estate, offering potential protection from creditors and legal judgments.
Estate and Gift Tax Reduction:
By removing assets from the trustor’s taxable estate, an irrevocable trust can potentially reduce estate and gift taxes.
Income Tax Planning:
Certain irrevocable trusts can distribute taxable income to beneficiaries in lower tax brackets.
Given their irrevocability, careful consideration is needed before establishing such a trust. An experienced attorney can guide you through the potential benefits and drawbacks.
At Peabody Law Firm, our experienced attorneys excel at helping clients navigate the intricate landscape of trust law.
Whether it’s creating a revocable trust for flexibility, an irrevocable trust for asset protection, or a combination of the two, we are here to provide expert advice and tailored solutions.
Beyond trusts, we offer broad estate planning services, as well as probate and business services, and proudly serve clients in Southlake, TX, as well as the communities of Westlake, Trophy Club, Colleyville, and Keller.
Our aim is to deliver personalized legal guidance to meet each client’s unique needs.
If you’re pondering the choice between a revocable and irrevocable trust, or require support in other estate planning areas, probate matters, or business services, Peabody Law Firm is poised to assist.
Contact us today to create a comprehensive estate plan that safeguards your wealth and secures your legacy. With our legal expertise, you can chart a secure course for the future.