Creating a comprehensive estate plan can seem like a daunting task that comes with several tough decisions, yet it is totally worth your time and money. Establishing a trust can make management of your estate convenient while you are alive and save your loved ones from the hardships of probate following your death. Revocable and irrevocable trusts are far more superior to a last will, as they not make your wishes known, but also ensure that they are carried out.

What is a Revocable Trust?

Revocable trusts can be updated, altered, and dissolved at any given time, while the creator is well (mentally sound) and alive. This kind of trust lets you retain maximum control over your estate and assets during your lifetime. The revocable trust will automatically become irrevocable upon your death.

Benefits of a Revocable Trust

·         Revocable trusts are largely chosen for their flexibility. They are meant to accommodate a growing family and business, as there are no restrictions to making modifications; amendment of a revocable trust is a much easier process than changing a will.

·         Revocable trusts avoid probate, thus your heirs/beneficiaries will not have to wait a long time or spend money to gain access to your estate.

·         Once a trust is created and funded, it practically manages the estate on its own. Your finances will be taken care of even if you become incapacitated.

·         You do not have to pay tax on proceeds from the trust’s estate.

·         Your financial info remains private and assets are only transferred upon your death.

Drawbacks of a Revocable Trust

·         Revocable trusts do not provide any relief or concession from estate taxes.

·         Your assets are not protected from creditors.

·         Unlike a will, the trust is not automatically updated, and assets need to be retitled, which is a time-consuming procedure.

What is an Irrevocable Trust?

As the name suggests, an irrevocable trust cannot be altered or abolished after the document has been signed. If you want to terminate or modify an irrevocable trust, it is only possible under very unusual circumstances. You may require consent of all beneficiaries and judicial approval to make that happen.

Benefits of an Irrevocable Trust

·         Assets you put in an irrevocable trust do not add to the value of your estate, which translates to major estate tax reductions.

·         Your estate is protected from probate judgments and notorious creditors.

·         You are able to preserve your wealth and qualify for government welfare programs, such as Medicare and Social Security benefits.

·         The trust can incorporate life insurance policies.

Drawbacks of an Irrevocable Trust

·         All income generated from the trust’s estate is taxed separately at higher rates.

·         You shall need to file a tax return for your irrevocable trust, which leads to additional costs.

·         The creator of the trust has to give up ownership and control over assets. The estate remains under supervision of an appointed trustee and belongs to beneficiaries.

Which type of Trust is Right for you?

Both kinds of trusts have their advantages and disadvantages; ultimately, it all comes down to your estate planning goals and preferences. There is no ‘one size fits all’ approach, which is why it is vital to consult Estate Planning Attorney in Little Rock, AR, on the matter. A number of aspects, including the size/value of your estate, your personal/business finances, and relationship with beneficiaries, are to be considered before determining the right choice.