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What’s the Difference Between Revocable and Irrevocable Trusts?
Many people are oblivious to the different kinds of trusts and the purposes trusts serve to maintain estates. Below, the two basic trusts are compared: revocable and irrevocable. However, when firmly deciding which trust to invest in, a discussion with an attorney will provide you with in-depth information and professional guidance.
The terms of a revocable trust can be changed at any time, whereas an irrevocable trust cannot be modified without the approval of the beneficiaries. If you choose to put property in a revocable trust, you maintain the ownership of the trust and have complete control over it. The property can always be taken out of the trust, and you control everything that happens to it. In terms of the IRS, revocable and irrevocable trusts are treated the same. However, if you choose an irrevocable trust, you essentially lose personal control over it. The trust claims ownership over the property and controls its future. The former owner of the trust (you) would not be able to remove the property from the trust or sell the trust itself. The future of the trust can only be controlled by the beneficiaries.
Choosing which trust is right for you depends entirely on your individual circumstances. However, the purposes of each trust can be separated based on their standard uses: usually, irrevocable trusts are used for estate and federal estate tax purposes, and revocable trusts (a.k.a. living trusts) are initiated to evade probate issues but do not affect your federal income or estate income taxes.
This decision should be made with the consultation of an attorney. An attorney will be able to guide you and explain each type of trust in more detail. With the information and purpose of each trust, you will be able to make an informed decision on what will most benefit you and your family.
To read IIyce Glink and Samuel J. Tamkin’s full article, click the link below.