The two basic types of trusts are a revocable trust, also known as a revocable living trust or simply a living trust, and an irrevocable trust. The owner of a revocable trust can change its terms at any time. All living trusts are revocable or irrevocable. The main difference between the two is whether you, as a grantor, have the ability to change the trust over time.
A revocable trust is also known as a living trust, a revocable living trust or. It is a modifiable legal document that creates a separate legal entity and allows the creator or grantor to re-title assets in the name of that entity or the trust. The grantor selects a successor trustee to administer those assets on behalf of the grantor and its designated beneficiaries. This means that even if the grantor transfers the assets to a living revocable trust, the grantor can recover its property by revoking the trust.
In most revocable living trusts created in the United States, the grantor, the trustee and the beneficiary are all the same person. Irrevocable trusts cannot be canceled after they have ended. This differentiates them from revocable trusts that can be terminated, at least until they become irrevocable upon the death of the creator of the trust (the grantor). For more information on revocable trusts, go here.
When talking about trusts, the term living means that the trust comes into effect for the life of the grantor. Therefore, an irrevocable living trust is a trust that goes into effect for the life of the grantor and cannot be revoked. To further confuse matters, a testamentary is a trust that is made during the life of the grantor, but does not take effect until the grantor's death. After creating a revocable trust, the assets must be re-titled in the trust's name because assets that are not formally held in the trust still have to go through probate and will not be under the management of a successor trustee in the event of disability.
Revocable trusts can be changed over time, either at the grantor's will or through clauses that may impose modifications for certain triggering events; irrevocable trusts must use different forms that must be established at the time of creation. A revocable trust also comes into effect as soon as the legal document is signed and funded, once the assets are titled in the trust's name. Waste Trusts: Waste trusts allow you to protect (and control) the gifts you give to those who can't manage the money themselves. However, certain types of assets can still prevent probate legalization, such as retirement plans, insurance policies, annuities, and jointly owned assets, which means that it may not always be needed.
A revocable trust becomes irrevocable after the grantor's death, as the grantor can no longer change or revoke the trust. Since assets transferred to an irrevocable trust are no longer owned by the grantor or part of its estate, irrevocable trusts also provide protection against creditors. A revocable trust does not offer protection if you are sued, your assets are at risk as if you still owned them in your name. But to date, no one has found an irrevocable trust that has been called the “Jane Doe Irrevocable Living Trust,” but that doesn't mean that somewhere, somewhere, there is a trust called the Jane Doe Irrevocable Living Trust.
With a living revocable trust, assets can be distributed to the grantor and, upon death, a “successor trustee” distributes the assets in accordance with the trust's statutory dictates. It is in contrast to a testamentary trust, which is a trust that comes into effect after the death of the person who created the trust. If you create a revocable trust, all assets transferred to the trust are considered your personal property because you continue to have full control over them. Maybe all of this has confused you instead of helping you understand the difference between revocable trusts, irrevocable trusts, living trusts, and testamentary trusts.
However, since assets held within the trust are no longer owned by the grantor or part of its estate, irrevocable trusts can protect assets from taxes and creditors. A living trust is one that the grantor, the person who creates and finances the trust, establishes during its lifetime. . .