TRUST Forms, Living Revocable Family Trust, Irrevocable Trusts, Asset Protection Trusts, Estate Planning, Legacy Trusts, Dynasty Trusts, Living Revocable Family Trusts
 TRUST Forms, Living Revocable Family Trust, Irrevocable Trusts, Asset Protection Trusts, Estate Planning, Legacy Trusts, Dynasty Trusts, Living Revocable Family Trusts

REVOCABLE LIVING TRUSTS vs: IRREVOCABLE TRUSTS

REVOCABLE LIVING TRUSTS

Revocable trusts, as described in the introduction won't provide you with tax shelter. However, revocable living trusts can shelter you from the probate threat to your wealth and control over it.

Literally, probate is the process of "proving" your will and transferring assets to your heirs. A lot of people spend a lot of time and effort trying to bypass probate, for these reasons:

* Expense. Depending on your state and the size of your estate, the total cost of probate might be 3%-7% of your assets. Say you die with a total estate of $300,000, certainly not a huge amount in today's world. From $12,000 to $28,000 might go to lawyers, executors and court fees--just for shuffling papers. For a married couple, two probates may be needed, costing as much as $24,000 to $48,000, before all of their assets can go to their kids. What's more, the probate fees get paid first, before your family gets whatever's left.

* Delays. Not only will probate cost your heirs, it can cause critical holdups. Although some states probate an uncomplicated estate in a matter of a few weeks, an "expedited" probate might take six months in others and a few states tie up assets for up to two years.

While assets are in probate, the court is in control. That means your executor or an administrator appointed by the court will manage them until the estate is settled. Will he or she buy and sell to take advantage of market or tax-planning opportunities? Perhaps--and perhaps not.

* Publicity. Adding insult to injury, probate proceedings are on the public record. Anyone can see a list of your assets and the debts you've incurred. Illegitimate claims may be brought against your estate and various scam artists may try to prey upon your heirs. If you own a closely held company and it goes through probate, its records will be exposed to competitors and creditors and management during probate will be awkward.

* Multiple probates. Suppose you own a vacation home or investment property outside your state of primary residence. Your estate will have to go through probate in that state, too, adding still more expense and aggravation.

It's clear, then, that probate is best avoided, if possible.

That's where revocable living trusts come in. In essence, once you transfer assets into the trust, they're owned by the trust instead of you. At your death, the assets stay in the trust, to be distributed by the trustee rather than by a probate court.

Interest payments, for example, go to your heirs right away, without the delays of probate.

This arrangement makes it very difficult for a disgruntled heir (or would-be heir) to challenge your disposition of assets--a big benefit. Another benefit is privacy: Your assets and their disposition are not exposed to the general public, as they are when assets go through probate.

Won't an irrevocable trust avoid probate, too? Yes, it will, and some people use them for this purpose. Revocable trusts are used more frequently, though, precisely because they're revocable. You can change the terms whenever you want even cancel the trust altogether. You can set up a revocable living trust naming yourself as trustee as well as beneficiary. If anything comes up that makes you unhappy, you can back out change the beneficiaries reallocate the trust assets.

You will, of course, name a successor trustee and successor beneficiaries to manage and receive the trust assets after your death. In the meantime, you have full control of the assets, just as you did before creating the trust. If you transfer stocks into the trust, for example, you can buy or sell them at will. You will receive the income from any trust assets; however, you'll owe the resulting income taxes. A revocable trust is not a tax shelter.

A revocable living trust can be used as an estate planning vehicle, too. In addition to naming individual beneficiaries for assets, you can, for example, set out instructions for other trusts to be established at your death.

The bottom line: With a revocable living trust, you have control over your assets while living. You can name who gets what at your death, and you can change your mind if you want to.

IRREVOCABLE TRUSTS

All of the benefits of a revocable living trust are usually included in an irrevocable trust.

The problems that most creators face are because of the absolute inflexibility of the trust. That can be avoided by creating the necessary features that allow flexibility.

Basically, you usually need to include in the trust agreement special conditions and permissions.
    For example:
  1. Permission to change beneficiaries
  2. Permission to change assets
  3. Permission to change who will pay taxes
  4. Permission to change distributions
  5. Permission to change financing
  6. Permission to change locations
  7. Permission to change state of jurisdiction

 TRUST Forms, Living Revocable Family Trust, Irrevocable Trusts, Asset Protection Trusts, Estate Planning, Legacy Trusts, Dynasty Trusts, Living Revocable Family Trusts
 TRUST Forms, Living Revocable Family Trust, Irrevocable Trusts, Asset Protection Trusts, Estate Planning, Legacy Trusts, Dynasty Trusts, Living Revocable Family Trusts