Revocable vs. Non-Revocable Trusts and Wills
April 4, 2023
What is a trust?
A trust is a legal document that facilitates the transfer of your assets to your beneficiaries more easily without incurring the costs and expenses of probate. Unlike wills that take effect after a Testator’s death, living trusts are created during the Settlor’s lifetime and apply during their lifetime.
What is the difference between will and trust?
A will outlines how an individual’s assets should be distributed among their beneficiaries and can also appoint an executor to manage the distribution process. In contrast, a trust allows the person to transfer their asset into a trust, which is managed by a trustee and can include provisions for the individual’s care in the event they become incapacitated. One significant difference between a will and a trust is that a will must go through the probate process, which can often be costly and time-consuming. A trust, conversely, bypasses probate and provides more privacy and flexibility in the distribution of a person’s assets.
What is a revocable trust (i.e., “a revocable living trust”)?
A revocable trust, often known as a living trust, is a legal document that specifies your assets and how you want them administered. Revocable trusts usually name the grantor or settlor (the person creating the trust) as the initial trustee, granting them complete control over the trust and its assets. In contrast to non-revocable trusts, revocable trusts are usually subject to estate taxes because they are under the settlor’s control and ownership.
The ability to control and modify revocable trusts and the assets within them after trust creation is why many clients prefer this type of trust. With revocable living trusts, once created you can change the trust beneficiaries, the amount of money or assets included in the trust, when the trust's contents will be distributed, and the trust's general status at any time. With grantor revocable living trusts, clients usually receive distributions of income and principal from the trust during their lifetime as needed. After a settlor’s passing, a revocable trust generally becomes irrevocable.
What is an irrevocable trust?
An irrevocable trust, like a revocable trust, outlines your assets and how they should be distributed to your beneficiaries. However, irrevocable trusts cannot be changed or amended after creation without the consent of the trust beneficiaries. One benefit of irrevocable trusts is that they are typically not subject to estate taxes. Also, in contrast to revocable trusts, irrevocable trusts last through a settlor’s lifetime and after their passing.
If you have any questions about creating a trust or a will or would like to start the process of creating one, contact our office at (704) 814-0729! You can also use our Contact Us form to reach us. We are happy to help you!