Monday, July 20, 2009

Trusts: Revocable or Irrevocable?

Trusts: Revocable or Irrevocable?

Clients usually know the difference between a revocable trust and an irrevocable trust. But, they often ask why one would be chosen over the other.

In Estate Planning, a revocable trust is more common because the trust's creator retains the ultimate power over the trust and its assets.

Among them, revocability also means that the trust is amendable. Amendments allow the trust's creator to make changes, adapt to changes in family, finances, and objectives.

Revocable trusts also have certain tax advantages, not only with income tax (a separate fiduciary tax return is not required) but also with property taxes (transfer to a revocable trust for the creator's benefit avoids reassessment under Prop 13 in California).

But, it is the flexibility and power to the creator that makes revocability desireable.

There are special circumstances where irrevocable trusts are desireable. They are often formed in tandem with a revocable trust. Irrevocable life insurance trusts and "special needs trusts" are common examples.

The choice of which kind of trust to utilize is important legal decision that should be made with the advice of counsel.


Check out my website at: My free, downloadable e-book, "The Seven Most Common Mistakes Made in Estate Planning" is available.

The information in this blog is for information purposes only and does not constitute legal advice. You should consult a qualified attorney in your jurisdiction for legal advice in this or any other legal matter.

Cal. State Bar No. 149756

No comments:

Post a Comment