The Pros and Cons of a Revocable Trust
Trusts — both revocable trusts and irrevocable trusts — are powerful and versatile estate planning tools that can be used to accomplish a variety of goals. But each type of trust comes with its own set of pros and cons. Deciding which type of trust to incorporate into your estate plan will boil down to your personal circumstances and what you’re trying to achieve with your estate plan. We’ve discussed the pros and cons of irrevocable trusts elsewhere. Now our Springfield trust lawyers turn their attention to revocable trusts.
Revocable Trusts: A Primer
There are two main types of trusts: revocable trusts and irrevocable trusts. With a revocable trust, the settlor (the person who creates the trust) retains the authority to modify, amend, or revoke the trust during their lifetime and may remove assets from the trust. With an irrevocable trust, the settlor generally cannot modify, amend, or revoke the trust or remove assets from it. Revocable trusts become irrevocable trusts upon the death or incapacitation of the settlor.
Pros of Revocable Trusts
Control and Flexibility
Settlors lose control over the assets they place in irrevocable trusts, and such trusts may only be amended or revoked upon the consent of all parties involved. That is not the case with revocable trusts. Settlors may retain access to and control of the trust assets and can amend the trust’s terms at any time.
Avoidance of Probate
One of the primary benefits of both revocable trusts and irrevocable trusts is that they avoid probate. The probate process can be lengthy, complex, and expensive, which are the last thing grieving families want to deal with. Revocable trusts give beneficiaries quicker access to their inheritances.
Since revocable trusts avoid probate, they also deliver the added benefit of privacy, as assets that do not go through probate do not become public record.
Cons of Revocable Trusts
No Tax Benefits
The control and flexibility of revocable trusts come at a cost. Since the settlor maintains access to and control over the trusts’s assets, they do not become separate assets. As such, any income they generate is subject to taxation.
No Protection From Creditors
Again, because the assets and income of a revocable trust continue to belong to the settlor, revocable trusts offer little protection from creditors and legal claims.
Revocable trusts do not automatically update themselves based on changes of circumstance, such as a divorce or the purchase of a house. The settlor of a revocable trust must continue to monitor it and make updates to its assets as needed.
Get Help Deciding Whether a Revocable Trust Is Right for You With Help From a Springfield Trust Lawyer
If you’re considering incorporating a revocable trust into your estate plan, the best first step would be to speak to an experienced attorney who can help you evaluate your options and implement the right plan for you. To get started, please contact a Springfield trust lawyer at LifeGen Law Group by calling 844-216-1195 or using our online contact form.