| Frank B. Yunes Attorney at Law, LLC |
 |
My clients often ask me to explain the difference between
a “revocable” trust and an “irrevocable” trust.
A revocable trust is created during our lifetime and may,
by its own terms, be revoked by the person who formed
the trust (the “donor”) while living. This reserved right to
revoke is routinely coupled with the right to amend the
trust, but only while the donor is living. Because the
action takes place while we are living, a revocable trust is
also commonly referred to as a “revocable living trust”.
In stark contrast, an irrevocable trust’s terms are
permanent and may not be amended or revoked by the
donor. An irrevocable trust may be created during our
lifetime or at death. A revocable trust normally becomes
irrevocable at our death.
There are significant advantages to the implementation of
either type of trust. First, assets held in any trust at the
time of death will avoid probate. Second, all trusts allow
us to create standards for how our assets are invested and
or disposed of long after our death. Third (and perhaps
least obvious), both revocable and irrevocable trusts can
help you and/or your heirs reap significant estate tax
advantages. A revocable trust can be drafted to take
advantage of critical tax elections not available otherwise.
This specialized tax treatment can, in certain
circumstances, save our heirs hundreds of thousands
dollars. An irrevocable trust has an estate tax benefit in
that assets transferred to the trust are no longer part of
our estate. The transfer of assets to an irrevocable trust is
tantamount to giving those assets away. Our estate will
only pay taxes on assets we “own" at death.
For all of these reasons, trusts are among the most
powerful estate planning tools we have at our disposal.
Frank B. Yunes, Esq.
a “revocable” trust and an “irrevocable” trust.
A revocable trust is created during our lifetime and may,
by its own terms, be revoked by the person who formed
the trust (the “donor”) while living. This reserved right to
revoke is routinely coupled with the right to amend the
trust, but only while the donor is living. Because the
action takes place while we are living, a revocable trust is
also commonly referred to as a “revocable living trust”.
In stark contrast, an irrevocable trust’s terms are
permanent and may not be amended or revoked by the
donor. An irrevocable trust may be created during our
lifetime or at death. A revocable trust normally becomes
irrevocable at our death.
There are significant advantages to the implementation of
either type of trust. First, assets held in any trust at the
time of death will avoid probate. Second, all trusts allow
us to create standards for how our assets are invested and
or disposed of long after our death. Third (and perhaps
least obvious), both revocable and irrevocable trusts can
help you and/or your heirs reap significant estate tax
advantages. A revocable trust can be drafted to take
advantage of critical tax elections not available otherwise.
This specialized tax treatment can, in certain
circumstances, save our heirs hundreds of thousands
dollars. An irrevocable trust has an estate tax benefit in
that assets transferred to the trust are no longer part of
our estate. The transfer of assets to an irrevocable trust is
tantamount to giving those assets away. Our estate will
only pay taxes on assets we “own" at death.
For all of these reasons, trusts are among the most
powerful estate planning tools we have at our disposal.
Frank B. Yunes, Esq.
The foregoing is for informational purposes only and should not be considered legal advice. |
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