Are you looking for guidance on how to establish either a revocable or an irrevocable trust? Trusts are often a very common part of an estate plan. However, determining which type of trust is best for you depends on your goals for the assets that will be placed into the trust. Understanding what the differences are between a revocable vs irrevocable trust can be confusing. Our experienced estate planning attorneys at Johnson Law Group can help. Contact our legal team today at (720) 463-4333 for a free consultation.
A trust is a legal entity established by someone to manage their assets. Trusts are set up while someone is alive so that their wishes about how their assets are used can be honored. Once the assets are placed into a trust the trust will name a trustee who will manage the trust assets. The trustee is responsible for investing the assets and distributing them upon the death of the owner of the trust after they pass away. In the state of Colorado, trusts are covered under Title 15 of the 2018 Colorado Revised Statutes.
A revocable trust (often also called a living trust) is a trust where the terms can be changed at any time. Items that can be changed include:
One downside of a revocable vs irrevocable trust is that the assets in a revocable trust can be reached by creditors if payment is needed on a debt. In addition, when the owner of a revocable trust dies the assets remaining in the trust are subject to state and federal taxes, and the trust becomes an irrevocable trust. Additional information on revocable trusts in Colorado can be found under Colorado Revised Statute § 15-5-602 (2018).
Unlike a revocable trust, an irrevocable trust can only be changed with the consent of the beneficiaries of that trust. The biggest difference between a revocable vs irrevocable trust is that the owner of an irrevocable trust essentially gives up all rights to ownership of the assets in the trust once the trust is established.
One benefit to having an irrevocable trust is related to tax obligations. Irrevocable trusts remove assets from the estate of the owner, thereby removing any potential liability to pay estate tax after the death of the owner.
Establishing an irrevocable trust can be difficult and often requires the help of an experienced attorney. Our estate planning attorneys at Johnson Law Group can recommend whether an irrevocable trust is best for you and your estate and would be able to help you establish one if needed.
There are a variety of reasons why you may choose one trust over another. Each one does have specific benefits, which you may want to consider as you are building out your estate plan.
The benefits of a revocable trust include:
The drawbacks of a revocable trust include:
Similarly, irrevocable trusts have benefits and drawbacks that may be helpful to you and your estate in the decision-making process.
The benefits of an irrevocable trust include:
The drawbacks of an irrevocable trust include:
Our experienced legal team can help determine which trust is best for you based on your estate planning goals and needs. If you are simply trying to prepare for potential incapacitation and/or the inability to make decisions on your behalf, then a revocable trust may be sufficient. If protection from creditors, as well as tax shielding is important to you then an irrevocable trust may be a better fit. Either way, our team can work with you on your objectives, goals, and concerns to find the right fit for you.
Our experienced estate planning attorneys at Johnson Law Group have helped people establish trusts and create estate plans and are prepared to work with you to find a solution that fits your needs and desires related to your assets. If you still have questions regarding the difference between a revocable vs irrevocable trust and the effect it may have on your estate, contact us today at (720) 463-4333 for a free consultation.