New York Estate Planning & Elder Law Blog
Trusts are either irrevocable or revocable. Many people prefer revocable trusts because they want to avoid placing their assets into a trust whose terms they can never change.
Simply put, irrevocable trusts are trusts that cannot be modified or terminated without the permission of the trust’s beneficiary. After passing assets into the trust, a grantor cannot change the terms and removes all rights of ownership to these assets.
Meanwhile, a revocable trust’s terms can be altered or canceled. During the life of the trust, income is distributed to the grantor, and only after the grantor’s death are assets passed on to the beneficiaries.
This article reviews some of the advantages of both types of trusts.
The Benefits of Irrevocable Trusts
While the terms of irrevocable trusts are much more difficult to change, some of the reasons that people select irrevocable trusts include:
- Because a person is no longer considered to own assets that are passed into an irrevocable trust, these assets are protected from creditors.
- It is possible to transfer assets into an irrevocable trust so that the assets are not subject to capital gains taxes.
- Assets in a revocable trust remain in a grantor’s estate. This means that if the assets are close to qualifying for the federal estate tax, the assets could surpass the limit. Assets in an irrevocable trust, however, are not viewed as part of the grantor’s estate.
Advantages to a Revocable Trust
Besides the potential to be revoked, revocable trusts often provide several other benefits. These trusts work well for individuals who are not facing significant tax issues but who want to maintain control of assets. Revocable trusts are also attractive to individuals who are concerned that they will eventually become mentally incapacitated. If the trust’s creator becomes unable to manage assets in a trust, a designed trustee can step in to handle assets. The terms of a revocable trust can even establish guidelines that the trust’s successor must follow.
Some of the particular benefits that are realized by creating a revocable trust include:
- Revocable trusts enable the trust’s creator to make sure that property remains capable of being used for the individual’s benefit.
- Using a revocable trust can allow the trust’s creator to name unrelated people who live outside of New York to act as the primary administrator of your estate.
- Revocable trusts avoid probate, which is a timely and costly process. Of course, the extent of the benefit of avoiding probate varies greatly between individuals.
- Assets that exist in a revocable trust at the time of the trust creator’s death can be utilized to pay estate taxes as well as administration expenses.
Contact an Experienced Estate Planning Attorney
Estate planning is a nuanced process and it can be difficult to determine what estate planning strategy works best for you. Fortunately, a knowledgeable estate planning lawyer can review your estate and determine what plan works best for you. Contact Ettinger Law Firm today to schedule a free case evaluation.