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Facts about irrevocable trusts

| Jan 20, 2021 | Estate Planning

When planning estates in Oklahoma, some people may consider trusts as part of the plan. Grantors, or the makers of the trust, can choose from various types of trusts, though irrevocable and revocable are the most common. Like any trust, revocable trusts have disadvantages, but they also have many benefits.

A grantor can amend the trust

An irrevocable trust cannot be amended once the grantor creates it, but they may change a revocable trust. They are allowed to add or remove assets, sell assets, change beneficiaries and appoint themselves trustee.

They may also assign a trustee as successor to manage the trust if they can no longer manage it. After the grantor’s death, it converts to an irrevocable trust, and the trustee divides the assets based on the grantor’s instructions.

Revocable trusts do not help avoid taxes or creditors

A common myth still circulates that revocable trusts help avoid estate taxes. Since the assets still belong to the grantor, they have to maintain taxes.

The grantor also has to pay taxes on any income made from the trust. The assets do not get protected from creditors for the same reason. Only an irrevocable trust helps to avoid creditors, estate taxes and income taxes.

Revocable trusts keep assets out of probate and maintain privacy

To carry out the will, most courts require a probate process, which can take several months. Avoiding probate helps beneficiaries save time and money on court costs.

Since probate court records are commonly public, anyone will be able to view the documents and see who owns the assets. Courts do not make the contents of a revocable trust public record, so it gives the grantor privacy. However, any assets not added to the trust must go through probate.

Estate planning isn’t just for wealthy people, and it makes sure that assets go where the grantor wishes. If a grantor needs advice on which trust to choose, they may consult an attorney.