When it comes to estate planning, some people are hesitant to get started because they are not sure where to begin. One concern many people have is whether or not they should create a trust; and if so, what type of trust they should create. There two main types of trusts are revocable and irrevocable. Each has its benefits and drawbacks, so which type of trust is best for you depends on your individual circumstances. The main difference between a revocable trust and an irrevocable trust is that in general, a revocable trust can be modified, while an irrevocable trust cannot.
It is never too early to begin estate planning. When you decide you are ready to begin the process, it is important to find an experienced estate planning attorney who can help you create an estate plan that best suits your needs. The attorneys at Galanti and Copenhaver have many years of experience handling California estate planning cases. With their experience and skills, they can help you get started with the estate planning process. Contact our office today to set up a consultation.
Benefits of Creating a Revocable Trust
Under many circumstances, it is a good idea to create a revocable trust. One of the benefits of making a revocable trust is that you have the option to modify, alter, or revoke the trust at almost any point in time while you are still alive. This method of estate planning gives you some control over your assets in the trust, while still giving you the benefit of peace of mind that your assets will be handled according to your wishes in the event you become incapacitated or pass away. It is the major difference between a revocable trust and an irrevocable trust.
With a revocable trust, you can generally make changes to it during your lifetime; while if you create an irrevocable trust, you cannot make such changes. You may find it necessary to make changes to the trust due to certain life events, such as a marriage or divorce, or the birth of additional children or grandchildren. Your estate planning attorney will be able to help you make the appropriate modifications to the trust as needed in the future.
Another benefit to placing your assets in a revocable trust is that you can help your beneficiaries avoid going through the process of probate upon your passing. Probate can be an expensive and lengthy process. Additionally, when an estate passes through probate, private financial details become public. If you want to keep your finances and assets private upon your passing, using a trust can help you accomplish this goal.
When to Consider Creating an Irrevocable Trust
While a revocable trust is a good form of estate planning for many people, there are some people that may benefit from choosing to create an irrevocable trust. With irrevocable trusts, you transfer ownership of the asset or assets to the trust. In situations where you have to deal with creditors, it may make sense to use an irrevocable trust, because then creditors cannot come after the assets within the trust since you are no longer the owner of them.
Like with a revocable trust, creating an irrevocable trust benefits you and your beneficiaries by allowing you to avoid going through probate. This is one of the many reasons people choose to create a trust for their assets. Depending on the circumstances, creating an irrevocable trust may also help your beneficiaries in the future to cut down on estate taxes.
Though generally, irrevocable trusts cannot be modified, there are some circumstances under California law which may allow for modification. Typically, this must be done with court approval. You may be able to amend a trust if all of the beneficiaries agree to the change.
Additionally, if the principle of the trust is too low to support the administration of the trust or to comply with a change in tax law, it may be possible to modify the irrevocable trust. Since this may involve complicated legal issues, it is a good idea to speak with an estate planning attorney that has handled issues like yours before.
Trustees for Revocable and Irrevocable Trusts
One important consideration to take into account when creating either a revocable or irrevocable trust is determining who the trustee will be. The trustee has a lot of responsibility in managing the assets in the trust, so it is important that you choose someone who you can trust to handle what is expected of them. You can choose a family member, close friend, or you can also go in another direction and choose an attorney or accountant to handle these responsibilities.