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A trust is a legal arrangement that allows you to manage and distribute your assets. You place property into the trust, and a trustee oversees it based on the instructions you provide. Trusts help you control how and when your assets pass to your loved ones or other beneficiaries. They also allow your heirs to avoid probate, which can save considerable time and money. Trusts come in many different forms, including revocable and irrevocable trusts.
What Is a Revocable Trust?
A revocable trust lets you retain control of your assets while you are alive. With a revocable trust, you can create the trust, act as the trustee, and make changes to it as needed. As its name suggests, you can also revoke a revocable trust entirely if your circumstances change. Revocable trusts offer significant flexibility, so they’re popular for managing assets during your lifetime and simplifying the transfer of property after death.
What Is an Irrevocable Trust?
An irrevocable trust permanently transfers assets out of your ownership. Once you create it, you cannot easily change or dissolve it. By removing assets from your ownership, an irrevocable trust provides benefits like protection from creditors or lawsuits. It can also reduce estate taxes by removing the assets from your taxable estate. Many people use irrevocable trusts for Medicaid planning or charitable giving.
Pros and Cons of Revocable Trusts
Revocable trusts provide flexibility because you can adjust or revoke them at any time during your life. They also let you avoid probate, which makes asset transfers quicker and less expensive for your heirs. These trusts give you full control over your trust assets, which many people find appealing. However, they do not shield assets from creditors or lawsuits because you remain the legal owner of the property. Additionally, a revocable trust does not offer tax advantages, so it won’t reduce your taxable estate.
Pros and Cons of Irrevocable Trusts
Irrevocable trusts provide benefits like asset protection and tax savings. Once you transfer assets into the trust, they no longer belong to you, so they’re shielded from creditors and lawsuits. These trusts also reduce your taxable estate, which can reduce estate taxes. Irrevocable trusts offer stability, so they’re an excellent option for long-term planning. However, they have significant downsides. For one, you lose control over the assets once you transfer them to the trust. Changing the trust terms is also difficult and often requires legal action.
Factors to Consider When Choosing a Trust
Choosing between a revocable and irrevocable trust depends on your goals. If you want flexibility and control, a revocable trust might work best. If you need asset protection or tax benefits, an irrevocable trust could be the better option. Consider your financial situation, family dynamics, and long-term plans when making your choice. Think about whether you need to protect assets from creditors or qualify for government benefits. Also, assess whether minimizing estate taxes is a priority. Your choice should align with your overall estate planning goals. An estate planning attorney can help you weigh these factors and make your selection.
Can You Combine Revocable and Irrevocable Trusts?
Yes. You can use both revocable and irrevocable trusts in a single estate plan. Each type of trust serves a unique purpose, and combining them provides flexibility and protection. For example, a revocable trust can help you manage assets during your lifetime and simplify estate administration. An irrevocable trust offers tax advantages and can shield specific assets from creditors. Using both allows you to address immediate needs and long-term goals.
An estate planning attorney can help you decide whether a revocable or irrevocable trust suits your goals or if it’s best to combine the two. They can explain the legal and tax implications of each option so you understand the benefits and drawbacks. They can also draft the documents necessary to create your trust and ensure everything is legally compliant.
Contact an Estate Planning Attorney in Massachusetts
Take the next step in establishing the right trust for your estate plan today. Contact The Law Offices of Patricia Bloom-McDonald to arrange your initial consultation. We will help you understand your options and create the trust that fits your needs.
Located in Westport, The Law Offices of Patricia Bloom-McDonald proudly serves clients across Massachusetts, including all of Bristol and Norfolk Counties, Plymouth, and the southern coast. Specific areas of service include New Bedford, Fall River, Dartmouth, Acushnet, Taunton, Dighton, Berkley, Swansea, Somerset, Seekonk, Fairhaven, Marion, Raynham, Easton, Mansfield, Attleboro, North Attleborough, Rehoboth, Lakeville, Bridgewater, Rochester, Norton, Assonet, Stoughton, Canton, Sharon, West Bridgewater, Brockton, Whitman, Maynard, Quincy, and Cape Cod. If you cannot come to us, we will come to your home, office, or a convenient location of your choosing. The initial consultation is complimentary.