What Is the Difference Between Revocable and Irrevocable Trusts?
When starting or changing your estate plan, you may find you need a trust. It is a common convenience no matter the amount of money or property you have.
You can use a trust to keep control of your assets during your lifetime or name a trustee to manage it for a family member after your death. You can add two types of trusts as part of your estate plan—revocable and irrevocable.
1. Revocable Trusts
A revocable trust, or living trust, is an arrangement put in place by a person who allows a third party to hold or manage the assets for a beneficiary. You create the trust while you are alive and can change it at any time.
An advantage to having a trust is to spare your family the expense of going through probate court. Suppose you have property and assets totaling more than $100,000. In that case, you might look at putting together a revocable trust since Washington state does not have a simplified probate process for over that amount.
2. Irrevocable Trusts
Unlike revocable trusts, you cannot change irrevocable trusts. You no longer have control over money or property in the trust; the trustee does. The law considers this trust permanent. However, a trustee has decanting power to change the terms or to distribute assets into a second trust.
An advantage of having an irrevocable trust is to minimize estate taxes. Also, Washington state law says that real estate in an irrevocable trust is sometimes not subject to real estate excise tax.
No matter the type of trust you decide to use, you must pick a trustee to oversee it. Choose a person who is trustworthy and good with money. This person will have the responsibility of taking care of your loved one’s future.