A revocable trust can be useful for a number of reasons. One of the many benefits of using a trust may be that grantors can avoid the cost, delay, and publicity of probate. The trust is revocable which means it can be changed by the grantor at any time, for any reason. Since the grantor retains the rights to or the benefits of the property, he or she will continue to be taxed for the property, and the property will be included in the grantor’s estate for estate tax purposes.

Irrevocable trusts cannot be changed after they are created, except in very limited circumstances. Irrevocable trusts can be created in two ways. One is as a standalone trust created as a part of the estate plan by the grantor. The second option is to create it through a last will and testament. This is known as a testamentary trust and is created through a will. The grantor will have passed away in order for the will to be read by the probate court and the trust to be created and so it is irrevocable. This type of trust will not avoid the probate court but will instead require its involvement. While testamentary trusts can be used in a wide variety of situations, they are commonly used to provide for minor children.

Irrevocable trusts are often used for tax saving, or for protecting a vulnerable beneficiary. In the first instance, because the grantor gives up the rights to and benefits of the assets contained in the trust when it becomes irrevocable, the grantor is not taxed for the assets. Instead, the trust itself is taxed, and its assets are not included in the grantor’s estate for estate tax purposes.

An irrevocable trust that protects a vulnerable beneficiary generally falls into one of two categories: spendthrift trusts for beneficiaries who might waste the money or have trouble with creditors, and special needs trusts whose beneficiaries also need to qualify for federal or state support programs for those with special needs.

Do you have more questions about how your estate plan may benefit from a trust? We are here to help. Please contact our office to schedule a meeting time.