When considering estate planning options, Florida residents commonly evaluate the pros and cons of developing a will versus a trust. In some cases, people utilize both of these documents. But, beyond this initial issue is yet another one for people interested in trusts. That issue is whether or not to create a revocable trust or an irrevocable trust.
In order to make this decision, having a good understanding of the difference between these types of trusts is important. The primary difference between these trusts pertains to the level of power that the grantor holds, according to Investopedia. When a trust is created, a person grants assets into the trust, thereby becoming the grantor. With a revocable trust, the grantor can cancel the trust or make changes to it at any time. With an irrevocable trust, the grantor has no such ability. Changes are only able to be made to an irrevocable trust if the beneficiary approves of them.
U.S. News and World Report explains that in the past, trusts were valued for their tax benefits. However, updates to tax laws have negated many of these benefits, at least for revocable trusts. Perhaps the most compelling reason to create a revocable trust today is to prepare ahead of time for the potential that a person would become unable to manage assets any longer.
For people with unique circumstances irrevocable trusts can still be useful. One example would be the need to provide financially for a disabled child or other dependent. Protection from professional liability can also be achieved with an irrevocable trust.