Perhaps you are new to estate planning. Or you prepared a plan years ago and need to revise it. Estate plans typically include a Will, a durable power of attorney, and a medical power of attorney. Many people also include a trust, a revocable trust and/or an irrevocable trust. If you are wondering, “should I use a revocable trust or an irrevocable trust,” think about the following questions:
Signing a trust document is not the final step to establishing a trust. The grantor, the person who formed the trust, must fund the trust. This is done by transferring ownership of assets from the grantor to the trust.
So, if assets are transferred to both revocable and irrevocable trusts, what’s the difference?
The grantor of a revocable trust may continue to control the trust assets. The same is not true for irrevocable trusts.
People often need to protect their property from lawsuits, civil judgments, creditors, and even ex-spouses. The question is whether assets transferred to a trust are protected.
Revocable trusts offer no asset protection during the life of the grantor. The grantor’s ability to continue using the trust assets makes them vulnerable.
Assets transferred to irrevocable trusts are protected from most claims.
With the federal estate tax limit at $11.2 million in 2018, people may feel they don’t need to consider tax reduction benefits offered by irrevocable trusts. However, discuss tax reduction with your estate planning attorney. Laws change. Also, while Florida does not assess an estate tax, other states still do. If you hold property in a state that charges an estate tax, keep in mind that the state estate tax limit is generally much lower than the federal limit. An irrevocable trust may still be an option for you.
Revocable trusts, however, offer no state or federal estate tax protection.
The grantor of a revocable trust may change the terms of the trust or even terminate it completely. Irrevocable trusts, by their very nature, are not meant to be changed. In fact, it can be virtually impossible to change the terms of an irrevocable trust, depending upon the trust language.
At Law Offices of John Mangan, P.A., we’ve helped many clients develop comprehensive estate plans that meet their goals and needs. We can set up an appointment for you if you just call 772-324-9050 or use our convenient Contact Form.
Located in Palm City, the Law Offices of John Mangan, P.A. also serves clients in Stuart, Hobe Sound, Jupiter, and Port St. Lucie.