The difference between a revocable and irrevocable trust

Trust administration is a frequent concern for people in St. Louis. It can be puzzling to understand the different possibilities that are available. Having an understanding over the basics can smooth the process and help people get exactly what they want. Part of this is knowing the difference between an irrevocable trust and a revocable trust.

With a trust, the settlor is the person who relinquishes control of money and assets and leaves them to the responsibility of a trustee. The trustee will, in turn, be responsible for distributing the money and assets to the beneficiaries at a time the settlor decides is appropriate. There are options of trusts including a revocable trust and an irrevocable trust. The idea of any trust is to avoid probate. With probate, the court will go through the decedent's personal property and settle anything that is not clear. Avoiding probate will save money and time. In addition, probate is a public record that the decedent might not want available for just anyone to see.

Revocable and irrevocable trusts have have positives and negatives. The revocable trust can be changed whenever the settlor wishes for it to be changed. An example could be if there are preconditions attached to it, such as a beneficiary getting a college degree at a certain point. If that is not achieved, then the trust can be revoked. With an irrevocable trust, the settlor does not have the ability to change the document. A benefit, however, is that the items in the trust no longer belong to the settlor. They are therefore protected from anyone who is against the trust and creditors. There are also tax advantages to it.

The decision as to whether to set-up an irrevocable trust or a revocable trust is up to the individual and hinges on his or her circumstances. Having a grasp of the differences, advantages and disadvantages of each is imperative before moving forward. Speaking to an experienced legal professional can help to set up a plan and take steps to put it into action with a trust.

Source: The Motley Fool, "What Is an Irrevocable Trust?," John Maxfield, accessed on Sep. 15, 2015

No Comments

Leave a comment
Comment Information