This article was updated March 2024. 

A trust is a legal agreement that allows a third party, known as a trustee, to hold and manage assets on behalf of the beneficiary. The importance of estate planning—something two-thirds of Americans don’t have—cannot be overstated. Proper estate planning, along with trusts, provide a mechanism for wealth transfer, help avoid probate, and can offer tax advantages.  

However, not all trusts are created equal. There are two primary types you’ll encounter: revocable and irrevocable trusts. Each has its unique characteristics, benefits, and ideal use scenarios. Crucially, knowing what your trust is designed to do is paramount. At Sowerby & Moustakis Law, we take pride in our comprehensive approach to crafting trusts. We consider potential future events and contingencies, ensuring flexibility and protection. 

Understanding Revocable Trusts 

Revocable trusts are dynamic estate planning tools that offer considerable flexibility. The main feature of a revocable trust is in its name—it can be altered, amended, or revoked entirely during the lifetime of the trust creator, known as the grantor. This adaptability allows the grantor to adjust the terms of the trust to accommodate changes in financial circumstances, family situations, or simply shifts in their estate planning goals. 

Benefits of revocable trusts are manifold: 

• Privacy: Unlike wills that become public record once probated, the terms of a revocable trust and the assets it holds remain private, protecting your family from potential scrutiny or solicitation. 
• Bypass the probate process: Assets held in a trust can be directly transferred to the beneficiaries without court intervention, saving time, court fees, and potential legal complications. 
• Incapacity protection: If the grantor becomes physically or mentally incapacitated, a successor trustee can step in to manage the trust’s assets, ensuring continuity and avoiding a potentially lengthy guardianship or conservatorship process. 

Revocable trusts are ideal when you desire flexibility and control over your assets during your lifetime. They’re particularly useful for individuals with significant assets, complex family situations, or those who value privacy and wish to avoid probate. 

Understanding Irrevocable Trusts 

Irrevocable trusts, unlike their revocable counterparts, are a type of trust that cannot be altered, amended, or revoked once established. The grantor permanently transfers assets into the trust, relinquishing all control and rights to those assets. 

This might sound daunting, but this firmness has its unique advantages and makes irrevocable trusts ideal for specific scenarios: 

• Tax savings: By placing assets into a certain irrevocable trust, they’re removed from your taxable estate, which can reduce or even eliminate estate taxes upon death. 
• Protect assets from creditors: Since the grantor no longer owns the assets, they’re generally safe from lawsuits or debt claims. 

Irrevocable trusts are especially beneficial when you want to provide for a loved one with special needs without disqualifying them from receiving government benefits. They’re also ideal for individuals with substantial estates who wish to avoid estate taxes or protect assets from creditors. 

Comparing Revocable and Irrevocable Trusts 

A revocable trust, or living trust, offers flexibility and control. You, as the grantor, can modify or dissolve the trust during your lifetime. This adaptability allows you to respond to life changes or shifts in your estate planning objectives. In contrast, an irrevocable trust is a firm commitment. Once established, it cannot be altered or revoked without the consent of the beneficiary. The assets transferred into an irrevocable trust are no longer yours; they belong to the trust. 

These key differences lead to distinct advantages. A revocable trust provides privacy and avoids the probate process, ensuring a smooth transition of assets upon death. An irrevocable trust can offer substantial tax benefits and asset protection from creditors, as the assets are removed from your taxable estate. 

However, both types of trusts share some common ground. They both allow for the orderly transfer of assets upon death, and they both can provide for a loved one with special needs without disqualifying them from government benefits. 

Understanding what a particular trust is designed to do is essential. Different trusts serve different purposes, and the most effective trust for you depends on your individual needs and circumstances. Some trusts are simply designed for straightforward asset distribution upon death. However, at Sowerby & Moustakis Law, we go beyond the basics. 

Our revocable trusts are crafted with post-death planning and flexibility in mind. We anticipate potential future challenges, including unexpected issues like substance abuse or special needs that may arise for a beneficiary. Similarly, our irrevocable trusts are designed with foresight, addressing potential future events and providing long-term asset protection if desired by the grantor. 

Secure Your Future with Sowerby & Moustakis Law 

The choice between a revocable and an irrevocable trust is not a decision to be taken lightly. Each type of trust serves distinct purposes, and understanding what your trust is designed to do is paramount. At Sowerby & Moustakis Law, we’re dedicated to helping you navigate these complex choices, ensuring that your estate plan aligns seamlessly with your vision for the future. 

We invite you to contact us at Sowerby & Moustakis Law for more information or assistance in setting up your trusts. Our team is ready to guide you through the intricacies of estate planning, offering expert advice tailored to your specific situation.  

Let us help you secure your legacy and provide peace of mind for your loved ones. Your future is our priority.