Our Colorado Estate Planning Attorney Explains the Differences
Estate planning can be a confusing process because there are often multiple options you can choose from. There are different types of trusts you can use to pass down properties and other assets to your beneficiaries. You can use trusts to keep your estate out of probate court after your passing. Revocable trusts and irrevocable trusts are two possible options.
However, there are major differences between revocable and irrevocable trusts. Below, our Colorado estate planning attorney explains those differences.
Revocable vs Irrevocable Trusts: Understanding the Differences
Revocable Trusts
Revocable trusts are trusts that you can change at any time. As a grantor, you can change the provisions of a revocable trust so long as you are mentally capable.
Revocable trusts are helpful for estate planning because they allow you to remove assets or even terminate the trust altogether. In other words, revocable trusts provide a lot of flexibility for your estate planning needs.
Additional benefits to revocable trusts include:
- Revocable trusts allow your beneficiaries to avoid probate court after your passing. Assets in a trust do not have to go through probate court, which can be a time-consuming process.
- Assets in a revocable trust are available and ready to be used to pay taxes, debts and trust administration costs at the time of the grantor’s death. Your beneficiaries do not have to wait on probate court to pay these expenses.
- The trustee can distribute assets before your death or incapacitation.
Irrevocable Trusts
Unlike a revocable trust, you cannot change the terms of an irrevocable trust. You cannot amend or dissolve an executed irrevocable trust. Once you create an irrevocable trust, you surrender your assets to that trust.
Although you cannot change the terms of an irrevocable trust, there are still several benefits afforded by this estate planning option. The benefits of an irrevocable trust include:
- Judgments from lawsuits cannot affect irrevocable trusts. You can protect assets from lawsuits with an irrevocable trust. Court orders cannot remove your assets from an irrevocable trust. You can use an irrevocable trust to protect your estate from creditors. Depending on your financial situation at the time of your death, these protections may be extremely advantageous for your beneficiaries.
- You can reduce your tax obligations with an irrevocable trust. For instance, you may be able to gift your estate to an irrevocable trust, which could reduce your estate tax liability. We encourage you to contact our attorneys to learn more about the tax benefits of an irrevocable trust.
- Much like with a revocable trust, assets in an irrevocable trust do not go through probate court after your passing.
Irrevocable trusts are beneficial for individuals who have a larger estate and more tax obligations as a result.
Contact Our Colorado Estate Planning Attorney to Learn More
Both an irrevocable and revocable trust can have benefits depending on your individual circumstances. You can contact our Colorado trust attorney to learn more about each option.
You can reach Skipton Law, LLC for a consultation by dialing (720) 770-3880 or by using the contact form on our site.