Planning To Establish A Trust… What Should I Do? Revocable vs. Irrevocable Trusts

Estate planning often involves setting up trusts. A trust is a legal agreement where property is held. It is therefore important to know and understand the types available: revocable versus irrevocable trusts.

An irrevocable trust is slightly easier to understand because it is quite straightforward. It is the type of trust that cannot be amended, modified, changed, or revoked after the agreement has been signed. After you place property into an irrevocable trust, you cannot retrieve it.

On the other hand, a revocable trust is much more flexible and can be changed at any time. However, a revocable trust does not offer creditor protection. What this means is that assets funded into a revocable trust will still be considered personal assets for creditor and estate tax – all trust assets will be considered yours for Medicaid Planning purposes, and will be subject to both state estate taxes and federal estate taxes and state inheritance taxes.

These two different kinds of trusts can accomplish a variety of estate planning goals, each with its own good and bad sides to it. Here are a few things to note about these two types if you are looking into establishing a trust:

For Irrevocable Trusts:

• Once property is placed into the trust, that property now belongs to the trust, not to you! Plan carefully!
• There is an estate tax reduction. Irrevocable trusts can remove the value of a property from one’s estate so that there will not be a property tax when the person dies.
• An Irrevocable Trust can be used to provide asset protection – by placing assets into an Irrevocable Trust, these assets cannot be reached by a creditor.

For Revocable Trusts:

1.      Revocable Trusts allow you to modify the terms at any time.

2.      Assets held in a Revocable Trust can avoid probate and be passed directly to the beneficiaries named at the time of the person’s death.

3.      Assets held in a Revocable Trust at the time a person becomes mentally incapacitated can be managed by a Disability Trustee; this allows individuals to plan for any issues that they think might come along in the future.

Trusts can be extremely tricky and there are many factors to take into account if you are looking into establishing one. If you are seeking guidance with establishing a trust, contact top Estate Planning Attorney Inna Fershteyn for assistance.

Law Offices of Inna Fershteyn and Associates, P.C.

(718) 333-2394

www.BrooklynTrustAndWill.com

1517 Voorhies Avenue, Suite 4

Brooklyn, NY 11235