Choosing between a revocable or irrevocable trust
Trusts are an important part of many estate plans for Floridians who plan to leave assets to their heirs. A trust can provide you with peace of mind that your heirs can manage their funds responsibly after your death. When adding a trust to your estate plan, you may choose between a revocable trust or an irrevocable trust. Understanding the pros and cons of each can help you make the best choice based on your needs.
Revocable Trusts
Revocable trusts, sometimes called living trusts, allow you to change the terms of the trust as needed when circumstances change. You have the discretion to change the terms of the trust at any time and for any reason. This can mean adding or removing beneficiaries or changing the way you wish for the court to distribute your assets. You can also add stipulations to the trust, which can be beneficial when you have young heirs and want to create a trust that will protect their interests after your death.
The main downside of a revocable trust is that it doesn’t fully protect your assets from creditors. If you have outstanding debt, a creditor may decide to sue for payment, which could lead to liquidation of the assets in the revocable trust to cover the debt. Assets held in a revocable trust are also subject to taxation on the federal and state level after the death of the owner.
Irrevocable trusts
An irrevocable trust is not changeable once you have signed the documents. This works well for those who are certain of how they wish for the court to handle their assets and debts after death and who don’t anticipate any major life changes in the future. There are very few exceptions that will allow you to change an irrevocable trust. Most changes will require a court order and consent from all beneficiaries to be legal.
Irrevocable trusts prevent assets from being subject to estate taxes after the owner’s death. Many people who are in professions that frequently face lawsuits choose to put their assets into irrevocable trusts as a form of protection. Irrevocable trusts generally receive protection from legal judgments and lawsuits from creditors.
Seek advice when creating a trust
The estate planning process often requires you to make difficult decisions on how you wish your affairs to be dealt with after your death. For many people, adding a trust to their estate plan provides comfort in knowing that the court will handle their assets accordingly. If you wish to include an irrevocable or revocable trust in your estate plan, it’s important that you seek legal advice to ensure that your plans align with Florida’s estate planning laws.