Irrevocable vs. Revocable Trusts in Palm Beach County

If you’re new to the world of trusts in Palm Beach County, you might have come across two different concepts: Irrevocable trusts and revocable trusts. While these phrases might seem complex, they are easier to understand than you might realize. These concepts can be even easier to grasp when you speak with an experienced estate planning lawyer in Palm Beach County.

The Main Difference Between Revocable and Irrevocable Trusts 

The main difference between these two trusts is easier to understand when you simply replace the word “revoke” with “change.” A revocable trust is “changeable,” and an irrevocable trust is “unchangeable.” Once you create an irrevocable trust, except under limited circumstances, that’s it there’s no going back. You cannot correct any mistakes, and you cannot adjust the trust to reflect new life changes.

Why Would I Choose an Irrevocable Trust? 

You might be wondering why anyone would possibly want to set up an irrevocable trust. After all, these trusts clearly offer less flexibility than a revocable trust.

Here’s the thing: Irrevocable trusts can do things that revocable trusts cannot. In the eyes of the law, an irrevocable trust provides greater “distance” between you and the assets that are placed in the irrevocable trust. Irrevocable trusts are separate legal entities. When you send assets to a trust, it’s like sending them to another person.

There is more legal separation with an irrevocable trust. With a revocable trust, you continue to have control over the assets, which means there is no legal separation between your trust and your own personal estate.

This reduced level of legal separation makes revocable trusts less effective for many roles including asset protection. Theoretically speaking, various parties could still go after your assets after you moved them into a revocable trust. These parties might be creditors, tax collectors, and plaintiffs who are trying to sue you.

Irrevocable Trusts Can Help Accomplish More Complex Goals 

Irrevocable trusts may be less flexible in terms of modifications, but there are many different irrevocable trusts, and they serve a variety of purposes. Taken together, they are arguably more flexible in terms of functionality. You can use irrevocable trusts for many things, including tax avoidance, Medicaid planning, saving for college tuition, providing for beneficiaries, and much more.

That being said, revocable trusts are still the backbone of a comprehensive estate plan. At the bare minimum, revocable trusts still succeed in keeping financial matters private and possibly avoiding probate.

 Can a Palm Beach County Estate Lawyer Help Me Establish a Trust? 

If you’re new to the world of estate planning, it might be difficult to determine whether you need an irrevocable trust or a revocable trust or both. Online research alone may fail to provide helpful answers, as each family has different needs. It might make more sense to discuss this subject further with an experienced estate planning lawyer in Palm Beach County. To learn more, contact Kitroser Lewis & Mighdoll today.

Sources: 

investopedia.com/ask/answers/071615/what-difference-between-revocable-trust-and-living-trust.asp

investopedia.com/articles/pf/06/revocablelivingtrust.asp