Creating a Trust: Is Revocable or Irrevocable Better?
As an alternative to a will, a living trust allows you to specify in writing how you want your assets distributed after your death. By creating and funding a living trust, you can identify how you want your assets managed/distributed and specify a person (trustee) to manage your assets either while you are living or if you become incapacitated and unable to do this for yourself. A fully funded living trust can be a safeguard that can protect you but also your beneficiaries.
When you pass away, and if your living trust is fully funded your estate does not go through probate; you will have designated a trustee to distribute your assets as outlined in the terms of your trust.
There are two main types of trusts: revocable and irrevocable. Both are private documents that will not be made public after your death (unlike a will). Depending on the terms of your trust, the trust’s assets may not be subject to Estate taxes which can be important for your beneficiaries.
Revocable Living Trusts in Denver
A revocable living trust can be altered at any time as long as the settlor (creator of the trust) is of sound mind. Beneficiaries can be changed or added, assets can be reallocated to different beneficiaries, etc. You still have access to and control of your property while you are alive and of sound mind. You still pay taxes on the income that the assets in the trust earns because you are the still the owner of the assets.
It is important to know that if you obtain additional assets after you create a revocable living trust, those assets should be titled into the name of your living trust. Assets do not automatically get added to the living trust. If you do not review your living trust and the titling of your assets regularly, some of your important assets may be left out and a probate proceeding may be necessary to transfer the assets to your trust upon your death.
Irrevocable Trusts in Denver
These documents cannot be altered in any way or revoked. When you set up an irrevocable trust, you no longer have access to the assets in that trust and these assets do not get included in your estate for estate tax purposes. You appoint a trustee to manage the assets of the trust pursuant to the terms of the trust. You will have no control over assets which are put into an irrevocable trust.
While this may seem like an extreme measure to take, an irrevocable trust may be recommended if you have a large estate. In looking at the overall picture, these documents may reduce or eliminate estate taxes and provide greater protection for beneficiaries and heirs. Creditors likely cannot go after assets held in an irrevocable living trust.
There are many different ways to protect your assets and provide for your family: wills, different types of irrevocable trusts and revocable living trusts and more. The process can be extremely confusing. Make sure you choose the right estate planning documents for your unique situation. Contact the Denver estate planning lawyers at The Brown Law Firm LLC: (303) 339-3750. We can explain in depth the differences among the various options. You can also send us a message online to set up an appointment.