Wednesday, May 8, 2013
Revocable or Irrevocable Living Trust: In Orange County, an Estate Planning Lawyer Believes It’s a Matter of Choosing Flexibility over Lower Estate Taxes and Less Paperwork
One of the more commonly accepted ways to escape probate is through a living trust. In a living trust, the estate owner or the grantor, transfers his properties from his name to a trust, while he is still alive. However, in preparing a living trust, you are still confronted with a choice between revocable and irrevocable trust. To decide which to choose, you will be better off consulting an experienced estate planning lawyer in Orange County.
At first glance, a revocable trust seems to be the better option. As the grantor, you have flexibility in designing your living trust while you’re alive. You can transfer properties from your name to the trust – and decide to pull out the properties from the trust. You can easily change the beneficiaries of the trust. You don’t have to consult anyone when you make your amendments.
With irrevocable trusts, you do not have the flexibility. If you want to sell off properties in the trust or change beneficiaries, then you would have to consult these people. Now, that can be cumbersome! For example, you initially named your present wife to be the beneficiary of a large tract of prime real estate. Then, you divorced her and got married again. Now, you want to transfer that prized property from your ex-wife to your present spouse. You will have to ask your previous wife if it’s okay with her to have the asset transferred to your present wife. Your ex would probably not agree to it.
In an irrevocable trust, it’s next to impossible to make amendments – especially when the interests of beneficiaries are involved. But from there, we can also see the strength of irrevocable living trust. In such a trust, the transferred estate is legally in the hands of the beneficiaries with the grantor ceding all his rights to it. And since the beneficiaries are the legal owners of the trust properties, they need not have to pay estate or inheritance taxes when the grantor passes away. Why? This is because legally there was no inheritance or change of ownership that took place at the time of death.
Since beneficiaries do not have to pay estate or inheritance taxes, an irrevocable trust may be said to be beneficial to them. But an irrevocable trust may also be good for the grantor. Since making amendments is difficult in an irrevocable trust, the temptation to make whimsical decisions is minimized – if not eliminated. Decisions to transfer properties or change beneficiaries entail paperwork, time and filing costs. Making all these amendments can put a stress on the grantor.
Preparing your estate planning papers involve many hard decisions on your part. And a knowledgeable estate planning lawyer in Orange County can help probe into your estate planning objectives to help you make the right decision.
In the end, what is important is having an estate planning document that fulfills your last wishes – and makes it less burdensome for your designated beneficiaries.
I help people protect their families through affordable, personalized estate planning. Tompkins-Law.com I am in solo practice in Orange County, California where I focus on estate planning, family trusts, living trusts, wills, corporations and business succession planning. I speak Spanish and serve the latino community. Fideicomisos-Testamentos.com