Irrevocable and Revocable Living Trusts
Estate planning is not only for the rich and famous, or the aging population. Anyone who wants certain wishes to be carried out after their death should have an estate plan in place. An estate plan entails vital documents that instruct how you want assets to be given to beneficiaries, who would be guardians over your children, what would happen if you were to become incapacitated, and more. A living trust is one type of document within an estate plan that can offer many advantages.
A living trust is established during a person’s life. The grantor, also known as the trustor, moves assets into a trust. This enables assets to be held by a third party for the beneficiary. There are different trusts that a person can choose to write, and the type will vary based on their circumstances. For example, a living trust is one of the most frequently used trusts, and comes in two forms, including an irrevocable living trust and a revocable living trust.
A revocable living trust puts all of someone’s investments, assets, real estate, and other possessions into a trust throughout their lifetime. As a trustor, or grantor, they can also appoint themselves as the trustee too, giving themselves the ability to make updates to the trust whenever they choose while still alive. The grantor must name a successor trustee, who would take over after the grantor passes away or in the event of their incapacitation. The successor trustee then transfers assets to chosen beneficiaries based on what is written in the estate plan.
As your lawyer can explain, like a trust lawyer Knoxville, TN families depend on from Carpenter & Lewis PLLC, there are many advantages of having a living trust. However, you must be aware that you will be taxed on your income, as the trust was established and managed during your lifetime. Benefits to having a living trust include but are not limited to:
- Helping reduce estate taxes
- Safeguarding assets for future generations
- Reducing the risk of family disputes
- Allowing updates to the trust as needed
- Keeping the contents of what is in your estate private
- Helping avoid an estate going through the probate process
An irrevocable living trust is a document that cannot be edited or terminated at any point, unless beneficiaries grant their permission to do so. As a team member from Carpenter & Lewis PLLC may offer, after assets are transferred into the irrevocable living trust, the trustor no longer has access rights. An irrevocable living trust can be beneficial because it protects assets if the trustor were to face a lawsuit, as they are exempt from being a part of any legal judgments. Additionally, bigger estates are favored under an irrevocable living trust since there will be several tax benefits. Gifting from an irrevocable living trust may be what the grantor chooses to do, as it will be estate tax exempt, even if the limit for tax-free gifts is exceeded.