Revocable vs Irrevocable Trust

When it comes to creating a Trust, there are three (3) parties to a Trust. First, you have the Grantor. They are used to identify the Creator of a Trust. They have legal and rightful ownership of all property and assets that will be put into the Trust. The Grantor and Trustee can be the same person or the Grantor can appoint a Trustee. 

Second, is the Trustee. The Trustee is a person who acts as a custodian for the assets in the Trust. They are responsible for managing and administering the finances of a Trust per the instructions left by the Grantor. The most important role of a Trustee is ensuring one acts in the best interest of the Trust. 

Lastly, is the Beneficiary. They are anyone who the Grantor names in the Estate Plan who will benefit from their estate. This benefit, or Assets that the Beneficiaries inherit, can include personal property such as money, or real property, such as a house. 

What is a  Revocable Living Trust?

A Revocable Trust or also known as a Living Trust is a Trust that can be changed or revoked for any reason, at any given time, as long as the Grantor is still living and deemed mentally competent. The Grantor can be the Trustee or he/she can appoint a Trustee. Having a Revocable Living Trust does not help you avoid estate taxes because of the power to revoke or alter the trust. 

What is an Irrevocable Trust?

An Irrevocable Trust can not be changed without all the Beneficiaries consent first, or in the alternative, brought to the Courts for a Judge to change. The main reason to select an Irrevocable Trust is to structure taxes. It removes the beneficiaries' taxable estate assets, meaning they are not subject to estate taxes upon death. When naming a Trustee, the Grantor has to appoint a Trustee. Under an Irrevocable Trust, the Grantor cannot be both the Grantor and the Trustee. An Irrevocable Trust is traditionally used for more complex estate plans, mainly because it cannot be altered.  

What is the Key Difference between the two Trusts?

A Revocable Trust is made so the Grantor can change his or her Trust at any given time. An Irrevocable Trust cannot be changed. To change or alter an Irrevocable Trust, one needs the consent of all beneficiaries or a Court’s approval. 

Contact our office at Askew & Associates, P.A. by calling 954-546-2699.

*Disclaimer: this blog post is not intended to be legal advice. We highly recommend speaking to an attorney if you have any legal concerns.