20 February 2025What Is a Revocable Trust?
A revocable trust, also known as a living trust, is a trust that can be changed, modified, or revoked by the grantor (the person who creates the trust) at any time during their lifetime.
Key Features of a Revocable Trust:
- Flexibility: The grantor retains full control over the assets and can make changes as needed.
- Avoids Probate: Assets in a revocable trust bypass probate court, making it easier for heirs to receive their inheritance.
- Privacy: Unlike a will, a trust is not a public document, so your assets and beneficiaries remain private.
- Continued Management in Incapacity: If the grantor becomes incapacitated, a successor trustee can step in and manage the assets without court intervention.
Pros of a Revocable Trust:
- Allows for easy changes during the grantor’s lifetime.
- Helps avoid probate, ensuring a smoother transfer of assets.
- Provides privacy for estate affairs.
- Allows for continued management in case of incapacity.
Cons of a Revocable Trust:
- Does not provide asset protection from creditors or lawsuits.
- Subject to estate taxes since the assets remain in the grantor’s control.
- Requires ongoing management to ensure all assets are properly transferred into the trust.
What Is an Irrevocable Trust?
An irrevocable trust is a trust that cannot be changed, modified, or revoked once it is established—except in rare circumstances with the approval of all beneficiaries and sometimes a court. Once assets are transferred into an irrevocable trust, the grantor no longer has control over them.
Key Features of an Irrevocable Trust:
- Asset Protection: Since the assets no longer belong to the grantor, they are protected from lawsuits and creditors.
- Tax Benefits: Assets in an irrevocable trust are not considered part of the grantor’s taxable estate, potentially reducing estate taxes.
- Government Benefit Eligibility: Certain types of irrevocable trusts can help individuals qualify for Medicaid or other government assistance programs by reducing their countable assets.
Pros of an Irrevocable Trust:
- Offers strong asset protection against creditors and lawsuits.
- Can help reduce estate taxes and preserve wealth for heirs.
- Useful for Medicaid planning and ensuring eligibility for government benefits.
Cons of an Irrevocable Trust:
- Cannot be easily modified or revoked once created.
- Requires the loss of control over assets placed in the trust.
- More complex and costly to set up and maintain than a revocable trust.
Which Trust Is Right for You?
The best type of trust depends on your financial goals and personal circumstances:
- Choose a Revocable Trust if you want flexibility, control over your assets, and to avoid probate.
- Choose an Irrevocable Trust if you want asset protection, tax advantages, or need to qualify for government benefits.
If you are unsure which trust is right for you, consulting with an experienced San Diego estate planning attorney can help you make the best decision.
How We Can Help
At Enright Family Law, we specialize in helping individuals and families create estate plans that align with their unique needs. Whether you are looking to set up a revocable trust for flexibility or an irrevocable trust for asset protection, our experienced estate planning attorneys can guide you through the process.
If you are considering creating a trust in San Diego, contact us today for a consultation. We are committed to helping you protect your assets and secure your family’s future.
