A common question that our clients always ask, is what are the differences between a Florida revocable and irrevocable trust? For those considering a trust, understanding the purposes of each of these trusts is crucial as the needs of a particular client will dictate which device is the right fit. A comparison of the primary issues concerning revocable and irrevocable trusts is set out below.
Ability to Amend/Revoke
As is apparent from their respective names, a revocable trust is able to be revoked and an irrevocable cannot. In addition to this aspect, the terms of a revocable trust are able to be revised at any time while the grantor(s) of the trust are still alive. On the other hand, once an irrevocable trust is created its terms are not able to be amended.
Asset Protection
With a revocable trust, the grantor or grantors (aka the creators or settlors of the trust) maintain ownership of the assets that are part of the trust. While this is convenient for some reasons, the trust does not provide any asset protection. An irrevocable trust moves those assets out of the grantor’s estate, and as a result the grantor is no longer considered to own them. An independent trustee makes all the decisions regarding investments on behalf of all the trustees, which may or may not include the grantor.
Tax Treatment
As mentioned above, the assets in a revocable trust remain in the grantor’s estate. If the grantor has significant assets and is possibly going to qualify for the federal estate tax, then perhaps the revocable trust is not the right choice for all of the grantor’s assets. With an irrevocable trust, those assets are no longer part of the grantor’s estate so those assets will not be counted with regard to the federal estate tax.
Additionally, there are ways to move assets into an irrevocable trust so that the grantor will be permitted to avoid capital gains tax. Bear in mind though, that transferring assets through an irrevocable trust may result in gift taxes being owed.
Probate Avoidance
While there are several differences between revocable and irrevocable trusts, both trusts attempt to accomplish the goal of avoiding probate at the time of the grantor’s passing and subsequent administration of the estate. In other words, the estate is administered by the trustee appointed by the grantor rather than the court.
Let the Wills, Trusts and Estate Attorneys at the Law Office of Ryan S. Shipp, PLLC, evaluate your Florida estate planning needs and make sure that your choice of trust best suits your individual needs. Call us today @ 561.699.0399 to set-up a consultation at our Lantana, Florida office.
Like this Blog? Please see below links to our other Wills, Trusts & Estates Blog Posts
- Is A Florida Pour-Over Will Different Than A Regular Will?
- What are the duties and obligations of a trustee under Florida Law?
- What is a Florida Revocable Trust and Why is it important?
- Why is a Florida Last Will and Testament Important?
- Florida Special Needs Trusts
- Different Types of Florida Powers of Attorney
- Persons Associated with Florida Trusts
- Revocable vs Irrevocable Trust Florida