Revocable and Irrevocable Trusts

Trusts are legal documents that can be used as an effective estate planning tool. Sometimes a revocable trust is referred to as a living trust.

The difference between revocable trusts and irrevocable trusts is that a revocable trust can be changed and even revoked entirely. Irrevocable trusts, on the other hand, cannot be changed during your lifetime. Once you put assets into an irrevocable trust, you cannot retrieve them. Irrevocable trusts are occasionally used to reduce estate taxes for estates that exceed the state and federal tax exemption.

Why have a revocable (living) trust?

Most people choose to have a revocable trust (rather than irrevocable) as part of an estate plan because they offer the following benefits:

• The revocable trust can be amended or revoked entirely, as determined by the owner (grantor) of the trust.
• Probate is most likely avoided.
• Property is generally transferred more quickly to beneficiaries.
• The trust is private, as long as disputes do not arise.
• You can choose someone to manage the trust should you become temporarily or permanently disabled, and you regain the right to manage it when you wish.
• Assets for minors can be held in the trust until they are adults or longer, if desired.
• The owner can choose a plan to distribute assets over time to certain beneficiaries. For example, young adults or adults with problems such as a gambling addiction, might not spend wisely. A trust can set up a schedule to distribute the assets over time or after certain criteria is met.
• If real estate is owned out of state, probate can be avoided if the real estate is included in the trust.

Understanding revocable trusts

When setting up a revocable trust is it important to note:

• Assets must be owned by the trust. Property remaining in the person’s name will likely be subjected to probate after your death.
• A “pour over will” should be considered in addition to a revocable trust. This can be beneficial in case assets were somehow overlooked or the trust was not recently updated. The sole provision of a “pour over will” is to put anything not named in the trust into the trust for distribution.
• There will likely be fees with the transfer of ownership of certain property from the owner to the trust. For example, transferring the deed to a home or title of a car, among other assets.
• Because assets change often, it is important to update your trust regularly, especially in absence of a “pour over will.”

How do you know if a trust fund is right for you?

An estate plan should give you peace of mind that your assets will be divided and distributed as you desire, and that all of your wishes are met. The experienced estate planning lawyers can help you decide if a trust is a good option for you.

Since 1931, the attorneys at Murphy Desmond have been assisting families, couples, and individuals with trusts, wills, powers of attorney, family business succession planning, and probate and fiduciary litigation. Contact our attorneys in Madison, Janesville, and Appleton, Wisconsin, for all of your estate planning needs.