Revocable vs. Irrevocable Trust

Deciding between a revocable or irrevocable living trust can be difficult. Revocable trusts are more flexible and allow the settlor continued access to the trust property, but irrevocable trusts can have tax and protective benefits that revocable trusts do not. At Fox, Shjeflo, Hartley & Babu LLP, our San Mateo County trust lawyers can analyze your situation and your goals to determine what type of living trust will best serve your needs.

Benefits of a revocable trust

A revocable trust works much like any other type of trust. With the help of a San Mateo County living trust attorney, a settlor creates a trust that designates a trustee and beneficiaries. The trustee manages the funds for the benefit of the beneficiaries in accordance with guidelines established in a trust. The advantage is that the settlor can modify or revoke a revocable trust at any time, allowing him or her to effectively take back the property in the trust should he or she decide to do so.

There are, however, disadvantages to revocable trusts. First, revocable trusts do not have the tax benefits of many irrevocable trusts. The settlor usually pays personal income tax on any trust income in much the same way he or she would if the trust did not exist. Additionally, because the settlor maintains control over the property, a revocable trust cannot protect assets from creditors.

Benefits of an irrevocable trust

The obvious disadvantage of an irrevocable trust is the lack or flexibility. To establish an irrevocable trust, the settlor must completely and permanently surrender control over the trust property. This can be a big decision and you should not make it without first consulting a San Mateo County trust attorney.

Conversely, irrevocable trusts offer many advantages that revocable trusts do not. First, many irrevocable trusts pay income tax as a separate entity. Because the settlor often does not pay personal income tax on this trust income, a settlor can, in some cases, use an irrevocable trust to move to a lower tax bracket.

Unlike revocable trusts, settlors can use an irrevocable trust to protect assets from creditors. This may not always be the case, however, as such transfers must be done in good faith under the California version of the Uniform Fraudulent Transfers Act (UFTA). Nevertheless, Fox, Shjeflo, Hartley & Babu LLP can, in many cases, help clients protect assets from future claims.

A San Mateo County trust attorney can help you plan for your financial future

Whether you are estate planning or establishing a structured gift for loved ones or charitable causes, a San Mateo County trust lawyer from Fox, Shjeflo, Hartley & Babu LLP can help. Our San Mateo trusts attorneys have helped clients throughout the Silicon Valley, San Mateo, and the San Francisco Peninsula reach their financial and estate planning goals. Contact us today for a complimentary consultation. Call our office at 650-341-2900 or leave a brief message on our contact page.