When you’re creating an estate plan, finding ways to reduce the hassle your loved ones experience upon your death and securing your legacy can be tough. But using revocable and irrevocable trusts can help you take control of their inheritance and your final wishes for your assets. While your Illinois estate planning attorney can help you set up a trust, it’s important that you understand your options before you get started. Let’s take a look at what these trusts are and how you can decide between the two when creating a comprehensive estate plan.
What Is a Revocable Living Trust?
A revocable living trust is a type of trust that allows you to maintain control while you’re alive. You’re allowed to add assets to the trust as you see fit and remove them from the trust if you want to sell them or give them to someone not designated as a beneficiary.
While you’re alive, you typically serve as the trustee, managing the assets as you see fit. This type of trust is ideal if you think you’ll want to sell certain assets in the future or aren’t sure if you want to create a permanent trust for your estate.
The Benefits of Revocable Living Trusts
Though everyone’s estate plan will be different, revocable living trusts can be a great way to protect your loved ones in the long run. Revocable living trusts offer several key benefits including:
- Probate avoidance: Assets kept in a trust and distributed to your chosen beneficiaries when you pass away are not subject to probate. This can save your loved ones time and money when getting their inheritance.
- More flexibility: Since you retain control over the assets in the trust, you’ll have the flexibility to sell assets as needed. You can also terminate the trust if you choose to do so at a later date.
- Enhanced privacy: When your estate enters probate, your assets can be discoverable by anyone who wants to look. When they’re in a trust, your assets will remain private.
What Is an Irrevocable Living Trust?
An irrevocable living trust is a type of trust that cannot be dissolved or changed once created. You can add items to the trust as needed, but you can’t remove them once they’re placed in the trust. This means you won’t be able to sell assets if you move them to the trust, and you can’t close the trust if you decide it’s no longer the right fit for your needs.
The Benefits of Irrevocable Living Trusts
Though irrevocable trusts are permanent, they still offer some unique benefits when incorporated into an estate plan. This includes the following:
- Estate tax reduction: When you keep assets in an irrevocable trust, they’re not included in your estate’s total value. This can reduce the amount of estate tax your loved ones will have to pay when you pass away.
- Asset protection: In some instances, assets held in irrevocable trusts cannot be pursued by creditors if you hit a rough financial patch. Why? Because the trust owns those assets, not you.
- Special needs planning: Irrevocable trusts can also help you provide long-term support and care for a loved one with special needs without impacting their ability to claim Social Security Income (SSI) and other government benefits.
When to Use Each Trust Type
Both trusts can be useful tools for your estate plan, but the type you’ll want to choose will depend on your situation. If you’re trying to avoid probate but still want to maintain control over your assets, a revocable living trust is likely a better fit. But if you’re trying to reduce estate taxes or want to protect assets from creditors, an irrevocable trust may be the best option.
Learn More About Your Options With Legacy & Life Law Firm
Every situation is unique. The best way to decide between a revocable or irrevocable living trust is to work with an experienced Illinois estate planning attorney. Contact us today to schedule a free consultation.