What Kind Of Trust Is Right For You?
Are you in the process of developing an estate plan for your family, and want to create a trust? If so, know that there are two types of trusts that you can pick from. Here are the basics of how revocable and non-revocable living trusts are different.
Who Has Control Of The Trust
The main difference between the two types of trusts is who has control over the assets in it. With a revocable trust, the grantor of the trust will be the one in control over all the assets and who is in the trust at any given time. This means that they can make changes to it as they want for any reason.
With a non-revocable trust, the grantor of the trust gives up control of all aspects of the trust once it is created. They cannot go back and change who is in the trust or remove assets from the trust. However, they can amend the trust to add new items to it, which they will then give up control over immediately.
What The Tax Implications Are Of The Trust
Taxes are handled in two different ways depending on what kind of trust you have. If you have a revocable trust then there will not be any gift or estate taxes when assets are passed onto the grantees while the grantor still has control of it. The grantor will need to pay for property taxes, income taxes, capital gain taxes, and any other taxes associated with the trust.
Meanwhile, non-revocable trusts are subject to taxes based on the terms of the trust. There are also higher taxes that are paid for income earned by a trust. This means that you need to be familiar with the tax laws and how they can affect what is in a non-revocable trust.
How Assets Are Protected
Any asset in a revocable trust is still considered the property of the grantor. Therefore, the assets in the trust are still subject to potential loss from lawsuits or creditors. This does not give these assets any real protection and does not guarantee that the assets will be passed onto the grantees at some point.
A non-revocable trust is treated quite differently since the assets no longer belong to the grantor of the trust once they are placed in a non-revocable trust. This means that the assets will receive protection from lawsuits or creditors since they technically no longer belong to the grantor.
To learn more, contact an estate planning attorney in your area.