Estate planning could involve many steps, such as drawing up power of attorney documents and writing a will. There are other matters that California residents may consider, including designing a trust. The planner could choose a revocable or irrevocable trust. Knowing the difference between the two before making any decisions seems advisable.
Revocable vs. irrevocable trusts
There are benefits to establishing a trust. The grantor could help beneficiaries by establishing a trust that allows assets to transfer to them without going through probate. Additionally, a grantor could have more control over estate management after they pass away. The grantor must decide whether to design a revocable or irrevocable trust.
With a revocable trust, the grantor can make changes or cancel the trust at any point during their lifetime. With an irrevocable trust, changes are only possible if all beneficiaries agree to the alterations. Even then, a judge may have to approve those changes. Be aware that a revocable trust becomes irrevocable upon the grantor’s passing. Irrevocable trusts remain irrevocable during the grantor’s lifetime and after the person’s passing.
Estate planning often involves making things less costly for beneficiaries. Federal and state estate taxes could be prohibitive, and a revocable trust does not shield beneficiaries from those obligations. However, an irrevocable trust might help beneficiaries avoid paying them.
Estate planners may need to weigh their decisions carefully before choosing an irrevocable trust. Deciding to revoke a revocable trust and draw up a will might take little effort. Things could become more complicated when locked into an irrevocable trust and dealing with beneficiaries unwilling to make changes.