What’s the Difference Between a Revocable Trust and an Irrevocable Trust in New York?

A person sitting next to a laptop signing a trust document.

When it comes to estate planning, creating a trust can be an effective way to protect your assets and provide for your loved ones after you pass away. However, not all trusts are created equal. In New York, two common types of trusts are revocable and irrevocable trusts. While both can help achieve your estate planning goals, they have distinct differences.

In this blog post, we will explore what these differences are, so you can make an informed decision on which type of trust is right for you.

What Is a Revocable Trust?

A revocable trust, also known as a living trust, is a trust that can be changed, amended, or terminated at any time during the grantor's lifetime. In other words, grantors retain control over the trust assets and can modify them as they see fit. Revocable trusts are commonly used to avoid probate, as assets in a revocable trust can be distributed to beneficiaries without the need for court involvement.

One significant benefit of a revocable trust is its flexibility. Grantors can add or remove assets from the trust, change beneficiaries or trustees, and modify the trust's terms as their circumstances change. Revocable trusts are also beneficial for those who want to keep their affairs private, as trusts are not part of the public record.

In addition, a revocable trust is a useful tool for someone with young children. It provides parents with control over their assets during their lifetime and specifically determines what happens when a minor inherits an estate. It enables parents to have peace of mind and flexibility in managing their assets now and for the future.

What Is an Irrevocable Trust?

An irrevocable trust is a trust that cannot be changed or revoked once it has been created. Grantors relinquish all control and ownership of the assets to the trust, meaning the assets cannot be removed from the trust and grantors cannot amend the trust's terms. Irrevocable trusts are commonly used for tax planning purposes, as they remove assets from the grantor's estate and can provide tax benefits.

One major benefit of an irrevocable trust is that it can protect assets from creditors. Because the assets no longer belong to the grantor, they are not subject to their creditors' claims. Additionally, irrevocable trusts can be used to provide for beneficiaries with special needs, as the trustee can manage the trust's assets on their behalf.

What Are the Differences Between Revocable and Irrevocable Trusts?

The primary difference between revocable and irrevocable trusts is the level of control the grantor retains over the trust assets. With a revocable trust, the grantor can change or revoke the trust at any time, while with an irrevocable trust, the grantor relinquishes control and ownership of the assets to the trust. Additionally, revocable trusts are subject to estate tax, while properly structured and funded irrevocable trusts can avoid estate tax.

What You Should Consider When Choosing a Trust in New York?

When deciding which type of trust is right for you, there are several factors to consider, including:

  • Control and Flexibility – If you value flexibility and control, a revocable trust may be the right choice.
  • Estate Tax and Creditors – However, if you want to avoid estate tax and protect assets from creditors, an irrevocable trust may be a better option.
  • Beneficiaries with Special Needs – However, if you want to provide for a beneficiary with special needs, an irrevocable trust is probably your best option.
  • Estate Planning Attorney – It is important to consult an experienced estate planning attorney to ensure your trust is drafted properly and meets your unique needs.

Choosing between a revocable and irrevocable trust can be a complex decision, and it's essential to understand the differences between the two. While both types of trusts can be effective estate planning tools, they have different benefits and drawbacks. By considering your unique needs and consulting with an experienced estate planning attorney, you can make an informed decision on which type of trust is right for you.

Need Help with a Trust? Discuss Your Situation with Our Experienced Trust Attorneys in Dutchess County

When it comes to trusts, ensuring your legal needs are properly met is crucial. At Letterio & Haug, LLP, we offer the expertise and experience necessary to handle your estate planning matters and trust documents accurately. You can trust us to take care of your legal affairs so you can focus on what's important to you.

If you're looking to establish a trust, whether it's an irrevocable trust or a revocable living trust, our team of experienced trust law attorneys at Letterio & Haug, LLP is here to help. With a proven track record of assisting clients in Dutchess County, we specialize in setting up trusts and addressing trust-related matters.

Call us at (845) 203-0997 or contact us online today to schedule a consultation with our trust lawyers in Hudson Valley.

Related Posts
  • What Are Advance Directives & Why You Need One Read More
  • Tips for Updating Your Estate Plan for the New Year Read More
  • What Can I Include in a Will in New York? Read More