When it comes to estate planning, you have several options for controlling what happens to your assets after you die. One popular tool is a living trust, which is a legal document that creates a trust while you are still alive. You transfer all of your assets to the trust and benefit from them during your lifetime. Once you pass away, your beneficiaries are given access to the assets, which will be managed by a designated trustee.There are two types of living trusts: revocable and irrevocable. Each one fulfills a particular need and purpose, so the right option for you depends on your goals and circumstances.
Irrevocable Trusts
With irrevocable trusts, there is no going back once the agreement is signed. Their primary purpose is to accomplish certain benefits that require you to first relinquish all control of your assets. They include:
- Property Protection: Once placed in a trust, your assets are protected from seizure by creditors. For example, if you have run up significant debt and a creditor gets a judgment against you, they can’t attach the assets in the trust because technically that property is not yours and not under your control.
- Estate Tax Reduction: When property is transferred into an irrevocable trust, it is no longer included in your taxable estate, so you won’t have to pay estate taxes on it. This can result in considerable savings.
Some revocable trusts are actually structured to become irrevocable once you have passed away, ensuring that your wishes remain intact.
Revocable Trusts
Revocable trusts allow you to retain a degree of control over your property while you are living and have the ability to manage your own affairs. You can change its terms or cancel it at any time. Although it doesn’t allow you to protect assets from creditors or reduce estate taxes, revocable living trusts are recommended for:
- Avoiding Probate: Probate applies only to property that you own, so anything transferred into a revocable living trust avoids the process entirely.
- Disability Planning: You can appoint a trustee to assume the management of the trust property if you become incapacitated to the point that you can’t manage your own affairs. There is no need for your family to appoint a conservator for you.
A qualified Colorado estate planning attorney can help you determine which living trust option is best for you. Contact the law office of Duncan Legal PC to discuss your needs and secure your assets for the future.