Trusts are a smart estate planning tool that give you more control over how your assets are distributed during your life and after your death. Living trusts are created during the settlor’s lifetime. They are either revocable or irrevocable, and knowing the difference will help you make the right financial choices for your beneficiaries and estate.
Here’s what you need to know about irrevocable and revocable living trusts in estate planning in Miami, FL.
Revocable living trusts
Revocable living trusts are trusts that can be amended during the settlor’s lifetime. For example, if you need to change the terms or decide to name a different trustee or beneficiary, you can amend the trust. You can even undo the trust entirely if you determine it no longer serves your purposes.
Unlike irrevocable trusts, all the assets in your living trust are still part of your estate, which means you’ll be liable for taxes if your creditors come after you.
The two main benefits of a revocable living trust are that they can help provide for your care if you’re incapacitated, and that they’ll also help your beneficiaries avoid probate when you die. For example, you can set up a trust to fund your medical care. If there’s still money left in the trust when you pass away, it automatically goes to your beneficiaries without needing to go through probate.
Another example would be putting your family home in a revocable living trust in Miami, FL. You’ll still control the home during your lifetime, but if you pass away suddenly, your beneficiaries will automatically control the home. Again, there will be no need for probate.
The benefit of not going through probate—in addition to avoiding a long, drawn-out process—is that the exact nature of your assets will not be known to the public, since trusts are private documents.
Irrevocable trusts remove the assets from your estate and from your control. Once they’re signed and the assets are placed in the trust, the terms and beneficiaries cannot be changed. (There are very rare exceptions.) For example, if you put $50,000 into an irrevocable living trust, that money is no longer part of your estate. You won’t be able to monitor or manage the funds, and you can’t change the beneficiary in case of divorce or other reasons. Furthermore, creditors will not be able to reach these trusts.
Many people use irrevocable trusts to avoid estate taxes—since the assets are no longer part of the estate, they will not be subject to tax. This is also a way people plan for Medicare (again, however, there are exceptions). They can place homes and other assets into an irrevocable trust so the money no longer counts against their eligibility. That way, they won’t have to sell the family home or other important assets.
When you need assistance setting up irrevocable and revocable living trusts for your estate plan in Miami, FL, we can help. Call Ruben J. Padron, PA for a consultation.
Categorised in: Estate Planning