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Pros and Cons of Irrevocable vs. Revocable Trusts

08/14/2023 | Blog
Irrevocable Trust Vs. Revocable Trusts

When you consider your estate plan, you may wonder which legal pathways to choose to protect and manage your assets, both during your lifetime and after your passing. Should you set up a revocable trust, an irrevocable trust, both, or neither? Here is an overview of trust options in California and consult a living trust attorney to help prepare for the future.

What Is a Trust?

A trust is a legal entity that can hold any type of asset, including money, stocks, real estate, valuables, and more. A trust includes three parties:

  • The settlor, or trust creator
  • The trustee, or trust manager
  • The beneficiary(ies)

Depending on the structure, trusts can serve many purposes, like avoiding probate, shielding assets from debtors, or providing for a loved one with special needs.

Does Everyone Need to Create a Trust?

If you already created a legally valid, up-to-date will, do you also need a trust? Not necessarily. If you have comparatively few assets and a small estate below the probate threshold, you may not need to bother setting up a trust. An experienced estate planning and living trust attorney can let you know what the current probate threshold is in California.

Revocable Trusts: Pros and Cons

Revocable living trusts are generally easy to set up, manage, and modify. You can act as an all-in-one grantor, trustee, and beneficiary during your lifetime and appoint a successor trustee to manage and distribute trust assets after your death.

Revocable trusts can:

  • Help your estate bypass the probate court
  • Give you greater control over asset distribution than a simple will (e.g., you can stipulate that a trust will release the money to a child once they graduate from college)
  • Undergo changes at any point during your lifetime (for example, after key events like marriage, divorce, or death)

The chief limitation of revocable trusts is their inability to protect assets. Since you retain full control of trust property, these assets still count as part of your estate for taxes and claims.

Irrevocable Trusts: Pros and Cons

Irrevocable trusts are just as the term implies: unamendable except for highly specific circumstances. This type of trust requires an independent trustee, and when you place assets in it, you relinquish direct control over these assets (although you may still benefit from trust proceeds).

Irrevocable trusts can:

  • Remove taxable assets from your estate and thus lower estate tax
  • Protect your estate from Medi-Cal (California’s Medicaid), creditors, lawsuits, and other claims
  • Secure separate property in the event of a divorce

The main drawback of irrevocable trusts is the difficulty of making any changes to the trust document after its creation. It’s crucial to work with a skilled living trust attorney to help make sure that your trust is in line with your estate planning goals and existing documents, like your will.  

Which Type of Trust Should You Choose?

So what type of trust would benefit you most? An estate planning consultation will help you set up the right type of trust based on your chief considerations, for instance:

  • If your main goal is avoiding probate, create a revocable trust.
  • If you’re in a profession that involves a high risk of lawsuits, consider an irrevocable trust.
  • If you need to establish secured provision for a disabled loved one, look into a special needs trust.

Law Offices of Alice A. Salvo: Trusted Estate Planning in Southern California

Not sure which trust will answer your asset protection and estate goals? Contact the Law Offices of Alice A. Salvo and start working on a reliable, end-to-end estate plan that can help shield your property, protect your family, and gain peace of mind.

Call 818-582-8624 or contact us online today to schedule a consultation with a living trust attorney in California.