Experienced Living Trusts Attorney in Brooklyn Heights and Manhattan, New York
Reliable counsel explains revocable and irrevocable trusts for succession
Living trusts are legal entities created during the grantor’s lifetime, as opposed to those types of trusts that come into being by operation of a will after the grantor’s passing. Living trusts are useful for inheritance purposes because they avoid probate, so the beneficiaries receive the assets in a timely manner. However, living trusts come with strings attached, especially with regards to whether the grantor can dissolve the entity and reclaim the assets. At the Cormac McEnery Law Firm, we make sure you are fully informed about the pros and cons of living trusts, so you can make the best decision for your unique circumstances.
Understanding the differences between revocable and irrevocable living trusts
A living trust can be revocable or irrevocable. That simply means that, at the trust’s formation, the grantor must decide whether to retain the right to dissolve the trust and retake ownership of the assets granted to the trust. The consequences to choosing a revocable (dissolvable) trust versus an irrevocable (permanent) trust are as follows:
- Ownership of assets — From the moment a grantor executes an irrevocable trust, the trust owns the designated assets. With a revocable trust, the grantor does not surrender ownership.
- Modification of terms —The grantor can amend a revocable trust, but cannot change the terms of an irrevocable trust. One exception is a special power of appointment that can permit the grantor to change the beneficiary of the trust.
- Estate tax avoidance —Since the grantor still owns the assets in a revocable trust, these are counted against the estate, and could trigger state or federal estate tax. An irrevocable trust owns the assets, so they are not counted in the estate, giving the grantor some protection from estate tax liability.
- Asset protection — Irrevocable trusts protect the assets from the grantor’s subsequent creditors and claimants. Trusts created to avoid current creditors can be ruled fraudulent transfers. The revocable trust does not protect assets.
- Medicaid planning — The asset protection an irrevocable trust provides facilitates Medicaid eligibility planning, the revocable trust does not.
- Trustee selection — With an irrevocable trust, the grantor chooses an independent person to oversee the trust. The grantor can act as trustee for a revocable trust.
- Income tax obligations — An irrevocable trust has a separate tax identification number and pays its own taxes or is claimed on a Schedule E of the grantor’s 1040. A grantor is responsible for income from a revocable trust.
Besides these basic features, trusts are very flexible instruments that can be used for a variety of purposes, such as structuring inheritances for spendthrift heirs, keeping your home in the family, managing inheritances for second marriages and providing for loved ones with special needs. We help you select the key provisions you need to address your estate planning needs.
To safeguard your wealth and avoid probate, contact our Brooklyn Heights, NY law firm
The right trust instrument with the appropriate provisions can protect your assets and seamlessly pass your property to your heirs. The Cormac McEnery Law Firm serves clients throughout the five boroughs of New York City, as well as Westchester, Nassau and Suffolk counties. To protect your hard-earned wealth, call us at 888.368.4329 or contact us online to schedule a free consultation.