Perhaps you are considering setting up a trust but wondering whether it should it be revocable or irrevocable.
There are advantages and disadvantages to each but choosing the type of trust ultimately depends on how much control you need—or are willing to give up.
The revocable trust
You might want to establish a revocable trust as an estate planning vehicle to accept assets if you should no longer be capable of managing your own affairs. Revocable trusts can hold a variety of assets, including retirement accounts such as an IRA or a 401(k). If you should become incapacitated, this kind of trust will protect your wishes and ensure they are properly implemented. A revocable trust also avoids the lengthy and expensive probate process. As the grantor, you have considerable control over a revocable trust. You can rewrite the terms as often as you wish, and, of course, revoke the trust as the name suggests. Keep in mind that there are no tax benefits attached to revocable trusts and no asset protection from creditors.
The irrevocable trust
The irrevocable trust offers two main advantages: first, there are certain tax benefits, and second, the assets have protection from creditors since they are titled in the trust’s name rather than yours. However, those who form irrevocable trusts must understand that they give up control over the assets, which they can only access at the discretion of the trustee.
Every circumstance is unique. You may worry about the possibility of becoming incapacitated. You may want to ensure the ongoing care of a disabled dependent. There are many reasons for establishing either a revocable or irrevocable trust. Rely on the guidance of your estate planning attorney to help you make the right choice.