According to a recent article, Minnesota residents may want to think carefully before forming an irrevocable trust. One of the primary differences between an irrevocable trust and a revocable trust is the ease or difficulty involved in making changes to the structure of the instrument. In the case of an irrevocable trust, for example, all trustees, beneficiaries and other parties involved must agree to changes before they can be formalized. In case of a revocable trust, an older version can be revoked in favor of a new trust as often as desired.
An irrevocable trust may provide some protection from taxes and creditors. However, the estate tax exemption for married couples is $10.6 million, meaning that many people will not be impacted by special protections afforded through irrevocable trusts. For many middle class families, there may not be any significant benefit in either type of trust. Using trusts for estate administration may be best for those who are very wealthy.
A revocable trust may be helpful for determining how personal affairs will be managed when an individual is no longer able to do for him or herself. However, while these instruments provide direction for the distribution of assets, they are unnecessary for jointly held real estate or other assets that transfer ownership automatically. Similarly, assets that already have designated beneficiaries do not need to be placed in trusts.
Ensuring that one’s final wishes are honored during the distribution of assets may depend on careful planning. A lawyer with experience estate planning and administration could help a client develop a strategy that provides for heirs and beneficiaries according to the client’s wishes.
Source: USA News, “How to Choose Between a Revocable and Irrevocable Trust“, Joanne Cleaver, June 19, 2014