Revocable Vs. Irrevocable Trusts: What Is The Difference?
There are many different tools you can use when planning your estate. One of the most useful of these are trusts. While there are also many different types of trusts, they all fall into one of two categories: revocable or irrevocable trusts. These two types of trusts have several differences and they are also used for different purposes. Below, our Daytona Beach trusts lawyer explains in greater detail.
What is a Revocable Trust?
The most common type of trust is a revocable trust. These trusts allow the settlor, or the person who created the trust, to make changes to it or revoke it altogether during their lifetime. After property is placed into the trust, settlors can manage the property within the trust, meaning they can sell it, gift it, or add property to the trust. Most people create revocable trusts so they can help their loved ones avoid probate while also managing their property in the event that they become incapacitated.
Due to their revocable nature, these types of trusts are very flexible. After the settlor of a revocable trust passes away, the trust becomes irrevocable. This means that they are a separate legal entity from the settlor and therefore, they do not have to go through probate. This also means that the property within the trust is shielded from creditors so they cannot seize the property to recover unpaid debt.
What is an Irrevocable Trust?
Irrevocable trusts have their own benefits and there are many different types a person can establish. Specifically, irrevocable trusts are typically used to protect the property within the trust from the cost of nursing homes and to help alleviate estate taxes. While Florida does not impose an estate tax, some estates do meet the federal estate tax threshold, which can significantly deplete the assets from the estate.
As the name suggests, these trusts are irrevocable, meaning settlors cannot change the terms of the trust once it is established. They also cannot use the property within the trust once it is established. There are many different types of irrevocable trusts and they include:
- Special needs trusts
- Qualified income trusts
- Pooled trusts
- Irrevocable asset protection trusts
- Irrevocable life insurance trusts
Due to the fact that these trusts are irrevocable from the time they are established, settlors often use them to protect their property from creditors. Unlike revocable trusts, this protection is in effect during one’s lifetime, and after.
Our Trusts Lawyer in Daytona Beach Can Draft Your Documents
Both revocable and irrevocable trusts have many benefits, but only if they are executed properly. If proper procedure is not followed, the trust is not funded properly, or there are other issues, trusts cannot provide the intended protection. At Bundza & Rodriguez, our Daytona Beach trusts lawyer can advise on the type of trust that is right for you, ensure the document is executed properly, and draft any other estate planning tools you need. Call us today at 386-252-5170 or chat with us online to schedule a consultation with one of our experienced attorneys and to learn more about how we can help.
Source:
leg.state.fl.us/statutes/index.cfm?App_mode=Display_Statute&URL=0700-0799/0736/0736.html
