A common question posed by clients who are dealing with a trust for the first time, is what is the difference between a revocable and irrevocable trust? The short answer is that a revocable trust can be disbanded at any time by the person who established it, whereas an irrevocable trust cannot. Most commonly, when we’re speaking of trusts as a tool to pass wealth along to future generations, the distinction hinges on how the trust is designated in the creation documents.
As I’ve mentioned before, estate planners like to use trusts as tools to keep their clients’ assets out of probate court. While there are no guarantees, this is generally pretty effective. A relatively common method for establishing a trust to accomplish this is to establish a revocable trust for the benefit of the grantor (the person who contributes assets to the trust) during his or her lifetime and then, upon the death of the grantor, the trust becomes irrevocable and benefits a carefully designated group of beneficiaries.
Usually, these instruments are crafted so that if I put all of my assets into a trust, I can still do what I want with them up until I pass away. Then, upon my death, the trust would become irrevocable, and the instrument would name a trustee to be in charge of distributing its assets, per my wishes, to beneficiaries I have named. In this way, probate isn’t necessary, I essentially die with no assets of my own, everything belongs to the trust, and the trust contains very specific instructions for what is to happen upon my death. Further, once I die, the trust becomes irrevocable, so the trustee is duty bound to do no more than protect my assets and distribute them per my wishes.
If you have specific questions regarding a trust in your life, contact a Sacramento trusts and estates lawyer for a free consultation regarding your specific circumstances. Contact the Law Office of Bowman and Associates today at (916) 923-2800 and we will help you understand the details and options of your specific situation.
