At Heritage Legal, PC, we regularly help our estate planning clients set up irrevocable and revocable trusts. Founding attorney Christopher Heritage takes the time to understand each client's objectives and tailors estate plans to their unique needs. If you are considering establishing a trust-based estate plan, we will provide you with informed representation and dependable service.
What is the difference between a revocable and irrevocable trust?
Revocable and irrevocable trusts have become popular estate planning tools in California. A grantor can change a revocable living trust at any time. The essential advantage of a revocable living trust is that it gives the creator or grantor more control over their assets during their lifetime. On the other hand, assets transferred into a revocable living trust are still considered the grantor's personal property. Thus, creditors still have access to the assets in the trust. An irrevocable trust is different, however, because the grantor cannot change the trust after he or she signs the trust agreement. One of the main benefits of using an irrevocable trust is to protect assets from creditors and to avoid or minimize estate taxes.
Revocable Trust Lawyer in Palm Springs
Living trusts are trusts that an individual creates during his or her lifetime. When creating a revocable trust, the creator of the trust, also called the grantor, transfers assets into a trust. Having a living trust allows you to control your assets owned by the trust during life. Upon the grantor’s death, the trustee distributes the assets in the living trust to the beneficiaries designated in the trust agreement.
The grantor of a revocable living trust can amend, or even revoke the trust during his or her lifetime. A living trust only becomes irrevocable when the grantor passes away. Creators of living trusts avoid the California probate process and conservatorships. At the same time, they allow grantors to control their assets until their death and gives them more flexibility than irrevocable trusts.
Common Types of Revocable Trusts
Revocable living trusts are one of the most frequently used types of trusts in California estate planning and there are many types of living trusts. In a revocable marital trust, for example, the trust owns the property after one spouse's death and transfers income produced by the property to the surviving spouse. Upon the death of the surviving spouse, the named beneficiaries receive the assets owned by the trust. Estate planners use several different varieties of revocable marital trusts. At Heritage Legal, PC, we discuss the best options for revocable trusts with our clients so they can make the best decision possible.
Similarly, when a client's main goal is to provide for his or her children, creating a revocable trust could be beneficial. By creating a trust, a parent can place assets into a trust with the intent of providing for children upon the parent's death. Typically, children cannot manage their property and money until they become adults. Parents can act as the trustee and manage their child's trust until their death, at which time an appointed successor trustee takes over the management of the trust. A further benefit is that parents can control when their children are to receive the full payout of their gift, for example 25 years of age.
Palm Springs Irrevocable Trust Lawyer
A grantor can also create an irrevocable trust during his or her life, however, it cannot be revoked, modified or amended. The benefits of creating a revocable trust include a reduction in the tax burden. Irrevocable living trusts also protect assets from creditors. There are several different types of irrevocable trusts, yet all irrevocable trusts require the grantor to relinquish their ownership and control of the trust property. California does allow grantors the ability to make limited modifications of an irrevocable trust in specific situations.
Commonly Used Types of Irrevocable Trusts in California
The bypass trust is one of the most commonly used types of irrevocable trusts by married people. In a bypass trust, the grantor transfers ownership of his or her assets into the trust. When one spouse dies, the surviving spouse can use the assets in the trust, but the surviving spouse does not own the property. Utilizing a bypass trust often results in tax savings.
Irrevocable life insurance trusts are another well-used type of irrevocable trust. In a life insurance trust, the trust owns the life insurance policy and acts as the beneficiary of the policy. When creating a life insurance trust, the grantor purchases a life insurance policy and names the trust itself as the beneficiary. The grantor selects a beneficiary or beneficiaries of the life insurance trust. When the grantor passes away, the proceeds of the life insurance policy are distributed into the trust. The trustee then distributes the insurance proceeds to the beneficiaries. One of the benefits of utilizing a life insurance trust is to avoid estate taxes.
Generation-skipping trusts and charitable trusts are also frequently used types of irrevocable trusts. In a generation-skipping irrevocable trust, grandparents set up the trust and name their grandchildren as the final beneficiaries. The children do not own the property within the trust, but they can draw income from the trust assets. When the children die, the trust property transfers to the grandchildren. Irrevocable generation-skipping trusts can be useful tools to safeguard wealth and ensure that it passes on to the next generation.
Deciding Between an Irrevocable and a Revocable Trust in California
Determining whether to create an irrevocable or revocable trust can be challenging. Both types of trusts have unique benefits and disadvantages. For example, if a client's goal is to create a trust to give to charity, an irrevocable trust offers the most tax benefits. However, the grantor may not desire to give up control of the trust. In this case, the client might want to set up a revocable trust that will fund an irrevocable trust upon his or her death.
Our Palm Springs Estate Planning Law Firm Can Help
At Heritage Legal, PC, we understand that each estate plan is unique. We use our experience and skills to provide our clients with an overview of all of their options when it comes to creating a trust. We listen carefully to our client's goals and develop a comprehensive estate plan that meets these goals. Contact our Palm Springs estate planning firm today to schedule your initial consultation and learn how we can help you. |