Transferring assets can be a complicated process if you try to do it yourself. Having a qualified estate planning attorney on your side is key to ensuring that you’re choosing the best possible option for your estate planning needs. Irrevocable and revocable trusts both offer certain benefits in the state of Utah—however, there are several considerations that should be made prior to including either in your estate plan. Below, we discuss irrevocable vs. revocable trusts in Utah, and what you need to know about both to move forward in confidence.
What is a revocable trust?
A revocable trust is a document that determines how your assets will be distributed in the event of your passing. Assets, in this case, may include possessions such as cars, real estate, and investments, or intangible “items” such as bank accounts. A revocable trust may also be called a revocable living trust.
This type of trust allows you to change the terms at any time during your lifetime. Examples of terms that you may chance can include:
- Adding beneficiaries
- Removing beneficiaries (at any time or for any reason)
- Editing how asset distribution will be done
When you are alive, you retain the rights of the trust and the property that is included. A ‘successor trustee’ will manage the trust in the event of your passing, which is why it’s vital to choose a trusted person as the trustee in this arrangement.
What are the benefits of a revocable trust?
Revocable trusts are effective tools for your estate plan. They are extremely flexible and can be modified at any point during your lifetime. You may choose to change the terms or dissolve the trust at any point and for any reason.
These types of trusts also ensure that your assets are available for your use if you become physically or mentally unfit to make decisions on your own or manage your own affairs. If you become incapacitated without a revocable trust, a court proceeding would need to occur to determine the guardian or conservator that would make those decisions on your behalf.
Revocable trusts also provide flexibility in naming unrelated people or out-of-state family members to act as the trustee over your assets during the time of your death. However, if you do not have a trust arranged at the time of your passing, you may not have this flexibility. Your estate planning attorney can help you to ensure that all necessary steps are completed before they become necessary.
An added benefit to revocable trusts is that the process of implementing changes is far easier than it would be with a will.
What are the downsides to using a revocable trust?
There are certain limitations on revocable trusts to consider before using them in your estate plan process. For example, assets in this type of trust are considered to be owned by the grantor since the trust can be changed at any time. Creditors may also make claims against your trust in an attempt to recover the outstanding debt, meaning that your assets may be at risk with this type of arrangement.
What is an irrevocable trust?
Irrevocable trusts are similar to revocable trusts, but they cannot be changed once they are executed. There are few exceptions to this rule, and changes of any sort are more difficult to make. Once the grantor’s assets are transferred into the trust, they are giving up ownership. This also means that the assets are removed from the taxable estate, and are owned by the trust.
What are the benefits of an irrevocable trust?
Many people use irrevocable trusts for estate planning, as they wish to avoid probate and protect their privacy. However, these trusts may also shelter assets from creditors and taxes, since the grantor doesn’t own the assets.
What are the downsides of an irrevocable trust?
Since the grantor gives up all control of their assets, they are subject to the trustee’s will. It also is quite inflexible compared to revocable trusts and is not designed to flex with the natural changes that may occur over one’s lifetime. For example, people and relationships change. You may want to change beneficiaries or remove them which is usually not possible with an irrevocable trust. It also doesn’t account for the possibility of your financial situation changing throughout your life.
Ascent Law is here to help you navigate the estate planning process in Utah
While you aren’t mandated to have a trust or estate plan in place in Utah, it is an excellent way to protect your assets and interests. It also reduces the weight on your family in the event of your passing. If you’re looking to begin walking through the estate planning process, the experts at Ascent Law want to assist. For more information about beginning your estate plan, or changing an existing plan, please reach out to our offices today for more information. Our lawyers will offer a free introductory call and discuss your next steps for success. Click here to visit our website.