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Understanding revocable and irrevocable trusts

On Behalf of | Oct 13, 2022 | Estate Planning |

When you create a trust, your purpose is to protect your assets and make sure they are distributed in accordance with your wishes. If you decide to set up a trust, you as the grantor will allow another person, the trustee, to hold your assets on behalf of your beneficiaries.

Many people think that a trust is only beneficial for large, wealthy estates, but in reality, trusts can benefit estates of all sizes.

Revocable vs. irrevocable trusts

There are several types of trusts to choose from, each with its own pros and cons. The two most common trusts are revocable living trusts and irrevocable trusts.

Revocable living trusts

Revocable living trusts are created during the lifetime of the grantor and can be changed or revoked at any time during the grantor’s lifetime. Once the grantor dies, the trust becomes an irrevocable trust.

Revocable living trusts are less costly to create than other trusts and your beneficiaries can skip the probate process for any assets within the trust. This type of trust also ensures financial privacy even after your death.

However, assets within the trust may be considered part of your taxable estate, making them subject to estate taxes after you die.

Irrevocable trusts

An irrevocable trust can be created during the grantor’s lifetime and after the grantor’s death, but once you transfer assets into the trust, you are no longer allowed to make changes.

An irrevocable trust is less flexible than a revocable trust, but assets within the trust are not part of the decedent’s estate. Therefore, they will not be subject to estate taxes after you die.

It can be difficult to decide which type of trust is best suited for your needs. An estate planning attorney in Georgia can advise you on all of your estate planning needs.