Creating a trust whether it’s irrevocable or revocable, is an essential estate planning tool. Similarly to a will, a trust protects your assets and ensures they are distributed to your heirs according to your wishes. However, unlike a will, a trust offers more control over your assets but is typically more expensive and involves multiple parties to initiate the process (e.g., a trustor, trustee, the trust beneficiaries, and so on).
If you are considering the benefits of a trust over a will, or are contemplating the advantages of having both, it is essential that you understand the key differences between an irrevocable trust and a revocable trust.
Irrevocable vs. Revocable Trust
It is easier to understand the difference between these two legal terms when you consider the definition of “revocable.” If you can revoke something, that means you can take it back or cancel it. If something is “irrevocable,” you are unable to cancel it—or you might be able to, but it will be very difficult (and expensive) to do so.
These simple definitions help provide us with a basic understanding of these types of trusts, but there are many important differences between the pair that you’ll need to consider before choosing the right estate plan for you and your family’s future.
What Is an Irrevocable Trust?
The term irrevocable trust refers to a type of trust where the Grantor (i.e., the person establishing the irrevocable trust), transfers all ownership of assets into the irrevocable trust and then legally removes all of their rights of ownership to the assets and the trust.
When setting up the irrevocable trust, the Grantor has the ability to establish the terms and provisions of the irrevocable trust.
Once the irrevocable is established—with few exceptions—the Grantor cannot modify or amend the terms of the irrevocable trust, or terminate the irrevocable trust.
Advantages of Irrevocable Trusts
Irrevocable trusts are generally set up to help minimize estate taxes, provide access to government benefits, and protect assets.
Want more information about irrevocable trusts, and whether this option is suitable for your estate plan? Contact our Estates and Trusts attorneys to learn more!
What Is a Revocable Trust?
A revocable trust, similar to a will, contains the instructions for what you want to happen to your assets in the event of your passing. But, unlike a will, the provisions of a revocable trust can be carried out without needing a probate proceeding.
A revocable trust also avoids the need for ancillary probates—if you own property outside of Wisconsin. This is accomplished by transferring the ownership of your assets from your individual name to your revocable trust during your lifetime, or upon your death, by a beneficiary designation or by a marital property agreement.
Advantages of a Revocable Trust
Unlike an irrevocable trust, the Grantor of a revocable trust can amend or modify the terms of the revocable trust and revoke or terminate the revocable trust at any time.
A revocable trust can also be used to provide assistance in managing your assets during your lifetime.
Want to learn more about revocable trusts, and whether this type of trust suits your estate plan? Contact our Estates and Trusts attorneys to learn about your options.
Estate Planning Support
Estate planning is important for every adult—regardless of age, health, or net worth. Though we hope we live a long life, having a plan that protects your family’s future—if the unexpected were to occur— is essential.
A well-crafted estate plan enables you to achieve your goals of properly transitioning your property and investments to your heirs in a cost-effective way. It’s also another way you can secure your family’s future and ensure everything you’ve worked hard to achieve stays in your family’s name.
To get started with estate planning, or if you’d like a professional to review your current plan, our team can help! Contact us today to learn how we can support you today, tomorrow, and in the future!
