More and more Alabama residents are learning about the benefits of crafting irrevocable trusts for their assets. While this term may at first seem very final, when one gets to understand the ins and outs of this type of trust, it becomes overly clear just how beneficial it can be for one’s estate. If you’ve never heard of an irrevocable trust or a revocable trust, it’s important to understand these terms as part of your estate planning process.
Revocable vs. irrevocable trust
Your estate planning strategy may include the need to set up a trust. The two different kinds are revocable and irrevocable. In a revocable trust, also called a living trust, you act as both the trustor and the trustee. This trust is designed to be a place where you can put your assets and maintain the ability to manage them until your death. An irrevocable trust, on the other hand, generally does not provide the grantor with the ability to revoke or amend the trust after its setup.
Why would someone want an irrevocable trust?
In most cases, an irrevocable trust cannot be modified by the grantor after it is set up. This could make one wonder just why a person would choose an irrevocable trust over a revocable trust. The main reason is that an irrevocable trust can actually lower your estate tax liability and offer more asset protection from lawsuits and creditors than a revocable trust does. In addition, an irrevocable trust has the other benefit of not being able to be changed if the grantor is worried about one day lacking mental capacity or being under the influence of another person to change it.