If you have done any research into estate plans, then you have likely heard about revocable living trusts. Not only is it something you can do as part of your estate plan. It’s something that we highly recommended for most people. However, this begs the question, what about irrevocable trusts. What’s the difference between a revocable and an irrevocable trust. At Collins Law, we can provide you with answers.
What is a Revocable Living Trust?
Let’s break down the words individually to get an understanding of what each of them means in context with one another:
- Revocable—This means that the trust can be changed
- Living—A living trust is one created and operated while you are still alive
- Trust—Lastly, a trust is a construct that can contain assets and establish a plan for management, succession, and inheritance of those assets.
Now that you understand the whole phrase, you might fixate on the revocable part. If a trust is changeable, why would anyone want the alternative with an irrevocable trust?
Are There Benefits to an Irrevocable Trust?
For an irrevocable trust, changes cannot be made except under exceedingly rare circumstances. For many, this is very restrictive and undesirable. However, things placed in an irrevocable trust are not taxed as part of estate assets upon death. Additionally, the benefactor is relieved of any tax responsibility from income created by those assets.
In short, an irrevocable trust helps you protest your assets and protect your benefactors. Their restrictions mean that they have to be set up for the right assets and set up correctly the first time as there will not be a second chance. Often these are beneficial to use in conjunction with a traditional revocable living trust and not as the only solution for your estate plan.
Can a Revocable Trust Become Irrevocable?
When the granter of an irrevocable living trust dies, the trust automatically becomes irrevocable. It is also possible to set up a trust such that when one granter (often one spouse) dies, the trust becomes irrevocable. The same is true if a granter becomes incapacitated as well. If you need help setting up your trust in Wisconsin, rely on the experts at Collins Law to handle it for you.
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