Estate planning can involve extensive legal considerations, including provisions for the following:
Living trusts, whether revocable or irrevocable, are excellent options to protect your assets and your family’s future. Consider the following factors to decide which kind is right for you.
A significant benefit of both revocable and irrevocable trusts is the elimination of probate. Your beneficiaries will not be required to partake in expensive and time-consuming legal hearings as they would with a will. If you have assets in multiple states, probate must occur numerous times.
If you become incapacitated, you can designate a trustee to pay your bills and necessary healthcare expenses with revocable trust funds. Or, by placing your assets into an irrevocable trust in the name of a beneficiary, you can satisfy income limits that may qualify you to receive Medicaid. An irrevocable trust can also do this for your incapacitated beneficiaries.
It is possible to alter or dissolve revocable trusts to accommodate changing circumstances during your lifetime. This flexibility eliminates some of the pressure of estate planning.
Irrevocable trusts are unchangeable but set aside assets for a beneficiary. Beneficiaries can include individuals, charitable organizations or a combination of both.
Both revocable and irrevocable trusts provide the privacy that is very attractive to high net worth individuals. Only the owner, the trustee and the beneficiaries need to know the financial details and arrangements.
Revocable trust owners pay taxes on the income they make from their trust while they are alive. During this time, beneficiaries who receive trust payments are not obligated to pay taxes because the owner has paid them. However, benefit recipients must pay taxes on any income they receive from a revocable trust after the owner dies.
Irrevocable trusts are not taxable, but owners can not access the funds because they are in a beneficiary’s name. The beneficiary will pay the appropriate taxes upon the owner’s death.
A revocable trust allows you to make adjustments regarding the distribution of your assets whenever you like. However, it does not protect your assets from creditors and lawsuits. An irrevocable trust does guard against these occurrences, but you may not access the funds.
Whether you have a large estate or a modest one, it is best to consult with an estate planning lawyer, such as from Wiseman Bray, PLLC, who can advise you about the best trust to achieve peace of mind for you and your family.