Every estate planning strategy will look different based on your individual circumstances and unique family needs. There are so many legal tools at your disposal, sometimes it’s difficult to decide on the best course of action. Of course, an experienced estate planning attorney will provide you with the appropriate guidance, so you can make informed choices. Two commonly used, but often misunderstood estate planning tools are revocable and irrevocable trusts. This post will provide some insight so that you can feel more prepared at your first consultation.
Trusts are incredibly useful tools in estate planning. A trust is a legal arrangement where a person (known as the settlor or grantor) transfers assets, such as property, investments, or cash, to a separate entity (the trust) managed by a trustee. The trustee holds and manages the assets for the benefit of one or more beneficiaries as designated by the grantor. They provide a lot of flexibility and have the added benefit of allowing your loved ones to avoid the time-consuming and costly process of probate.
A revocable trust, also known as a living trust, allows you to maintain control over your assets during your lifetime while designating how they will be distributed after your passing. These are some of the key features and benefits of revocable trusts:
Flexibility: You have the ability to modify, amend, or revoke the trust at any time during your lifetime. This is ideal for those that need an estate plan that is adaptable to their changing needs and wishes over time.
Probate Avoidance: When assets are held in a revocable trust, they can bypass the probate process after your passing, which allows for a more efficient distribution of your estate. Even with a will, probate can be expensive, and your family will have less control over your estate.
Privacy: The probate process is subject to public record. Many people opt for a trust to keep their assets private and away from public scrutiny.
Irrevocable trusts have many of the same benefits as revocable trusts. In contrast, irrevocable trusts cannot be easily modified or revoked once established. While this loss of control may initially seem daunting, they offer unique benefits for certain estate planning goals:
Asset Protection: By transferring assets into an irrevocable trust, you effectively remove them from your estate, which can provide protection against creditors, lawsuits, and potential estate taxes. This type of trust is commonly used for Medicaid planning or preserving wealth for future generations. This works especially well for those who want to create a nest egg for their children or grandchildren and ensure that the funds are protected from divorce proceedings or frivolous spending.
Charitable Giving: If you want to donate assets to a charitable cause, an irrevocable trust can ensure that the funds or property are used as intended. This has some potential tax advantages as well as it reduces the overall size and tax value of your estate.
Working With The Right Team
Estate planning can be challenging when left to make all considerations alone, but finding a legal team that respects your estate planning goals and balances compassion with practicality, will make all the difference. Your attorney will help you determine which type of trust is best for your situation and can provide guidance and resources for your loved ones after your passing.
You have the power to take control of your estate and make sure your legacy of hard work is preserved. At Kentucky Estate Planning Law Center, our team of legal professionals is dedicated to developing the right estate planning strategy for you and your family. For a free consultation, call (270) 982-2883.