As Palm Beach residents begin their estate planning, they will more than likely be confronted with numerous decisions to make. If it turns out that one or more trusts would work best for a particular situation, then one other decision will need to be made — whether to make a trust revocable or irrevocable. The trust creator needs to decide whether it would be more advantageous to be able to change, modify or terminate a trust rather than not be able to do so.
Revocable trusts are quite popular. People like the idea of retaining more control over the trust and the assets in it. This provides the ability to fix any mistakes or tweak the trust provisions while the grantor (the trust creator) is still alive. One of the major downsides to a revocable trust is that the IRS, creditors and possibly an ex-spouse retain the right to come after the assets in the trust since the grantor remains the owner. However, this type of trust still provides privacy, the ability to avoid probate and the ability for someone to immediately take over in the event of incapacity.
Irrevocable trusts, on the other hand, remove the grantor’s control over the assets held in the trust. This mean that creditors, the IRS and ex-spouses cannot reach the assets contained within them since the grantor relinquishes ownership and control over them. These trusts may not be changed as easily as revocable trusts, but the benefits may outweigh the downsides depending on the circumstances.
Trusts can be powerful tools for individuals attempting to protect themselves in the event of incapacitation and to protect their loved ones after their death, but they need to be done correctly to fulfill that need. In order to know which type of trust will work best in a particular individual’s situation, the totality of the circumstances must be reviewed. This may require the assistance of an experienced Palm Beach estate-planning attorney.