What You Need to Know About Revocable vs Irrevocable Trusts: Part Two

Our previous article introduced a few concepts regarding revocable and irrevocable trusts. It is clear that both of these legal constructs can be invaluable tools in building your estate plan, as they both offer unique capabilities and protections when it comes to distribution of estate assets. However, there are several, important distinctions between these two legal constructs. This article continues to guide readers through key information about the differences between these two legal constructs. While these articles hit on solid, important information everyone should know about revocable and irrevocable trusts, contact one of our experienced wills and probate attorneys if you want to fully understand how these items work in their entirety, and which might best serve your interests in your own specific circumstances.

Major Points Recap

As we explain in greater detail in our article “What You Need to Know About Revocable vs Irrevocable Trusts: Part One,” revocable and irrevocable trusts are both important tools utilized in estate building. However, there are key differences in how assets are handled under each of these constructs and the protections that each provides.

A revocable trust can offer the creator control of any potential re-distribution of assets, but the assets will have far less protection against claims by creditors. An irrevocable trust cannot be modified after it is initially created – meaning that the creator gives up their control of the assets outside of the parameters of the trust. In turn, those assets will no longer be considered as part of that individual’s personal estate, meaning the assets are afforded a great deal of protection against potential claims from creditors, and protections against certain taxes as well, which will be discussed in greater detail below.

Revocable vs Irrevocable Trusts: Tax Considerations

Every experienced estate attorney understands that tax planning is a key part of estate planning. The type of trust you choose to implement as a piece of your estate plan is going to have major ramifications on the effect of taxing on your estate.

Revocable trusts – generally speaking – do not offer any meaningful tax advantages. The law treats assets in the revocable trust as a part of the trust creator’s personal estate. Accordingly, the assets will be subjected to the same kinds of taxes as they would be if they were not placed in a revocable trust.

Irrevocable trusts CAN provide tax benefits. This is because when you place an item into an irrevocable trust, you no longer have control over that item. Accordingly, for tax purposes, it is removed from your personal, taxable estate. This means that if you place assets into an irrevocable trust, you might reduce estate taxes. It is, of course, imperative that you discuss any estate planning strategy with a qualified attorney. This is the best way to ensure that you understand how Florida tax and estate laws will apply to your specific circumstances.

Probate, Privacy Considerations

One item that many find to be vastly advantageous is the fact that revocable trusts can allow any assets in the trust to avoid probate. This can help to ensure a more efficient, private distribution of those assets. Irrevocable trusts offer significant benefits as well, as they can offer enhanced privacy of the assets. Assets placed in an irrevocable trust, and the terms relating to those assets, generally are kept confidential. An experienced attorney can help ensure that you understand the steps you need to follow to build your own successful estate plan.

Contact Suncoast Civil Law

Making an informed decision on whether a revocable trust, or irrevocable trust best serves your interests, can be huge in ensuring your estate is handled the way you envision. Contact one of the Sarasota wills and probate lawyers at Cardwell, Steigerwald Young to learn how to best build your estate plan to suit your purposes.

Sources:

nytimes.com/2023/10/13/arts/music/jimmy-buffett-will.html

finance.yahoo.com/news/revocable-living-trust-210600597.html