Revocable and Irrevocable Trusts

While it can be uncomfortable to talk about what your family and friends should do with your estate after you’ve passed away, it’s necessary to care for everything you own. Whether it’s your accumulated wealth, your real estate property, belongings, or any other kind of property, you should account for it. While a will dictates how everything will pass, it will go into probate, a process where a significant portion of your estate’s value and wealth will be lost to taxes. For this reason, the estate planning lawyers suggest that you make a revocable or irrevocable trust. Revocable and irrevocable trusts are two overarching types of trusts that other subsects fall under.

A trust itself is a legal and financial arrangement that transitions the ownership of the property that makes up your estate to the trust’s recipient. If you’re making a trust, you are the grantor or trustor, and you must select a grantee or trustee to receive its contents. You can make a trust that is only available to people under certain conditions, or an organization.

You have to be careful and thorough when making a trust. There are things you can’t put into a trust, and if certain pieces of property aren’t distinguished properly, they may not go where you want them to. Contact the estate planning attorneys at Tressler & Associates for help creating a trust.

What are Revocable and Irrevocable Trusts?

A trust is either a revocable trust or an irrevocable trust, it cannot be both. A revocable trust is a trust that you create during your lifetime and when you are conscious. This means that as long as you can make decisions for yourself, you can change or terminate the trust at any time. This does mean that if you become mentally incapacitated, there is no way to make changes to your revocable trust.

An irrevocable trust is the opposite of a revocable trust in most ways. It’s what a revocable trust becomes when you become mentally incapacitated or you die. From here on, it follows the rules you set forth, and can only be amended by a court in certain circumstances. This means if you meant to leave this trust to someone specific after you pass, they will receive it after you die or after a specific circumstance that you stated in your instructions. In cases where you are mentally incapacitated, a trust will become irrevocable, but it may not give your intended trustee its contents until after you die.

What Can Go Into Revocable and Irrevocable Trusts?

The difference between revocable and irrevocable trusts is your physical and mental state, but not what they can hold. This means that the same pieces of property can be held by your trust. Whether it is revocable or irrevocable doesn’t matter. They can both hold:

• Real Estate Properties – If the real estate properties are in other states outside of Tennessee or countries other than the United States, they may not be applicable. Consult with the attorneys at Tressler & Associates directly for more information.
• Cash Accounts – Consider any bank accounts you have, such as checking or savings. Putting them in your trust does not keep you from accessing them, but once you pass away, allows someone else to. Retirement accounts are not considered cash accounts.
• Non-qualified Annuities – These can be retitled to your trust so that after you pass, the recipient of the trust will be the recipient of your annuities.
• Stocks and Bonds – Ownership of your stock in a publicly-traded or privately-held company can be passed down through trusts. This is how family-owned businesses are safely passed down.
• Physical Property –  Any items, such as furniture, jewelry, gaming systems, collectibles, firearms, and pets can be put into a trust. You can pass motor vehicles through your trust but it’s an overly long and complicated process with easier solutions. Contact the estate planning attorneys at Tressler & Associates for more information.
• Money Owed to You – If there are documented debts owed to you for whatever reason, you can pass ownership of those mortgages to someone else. Then whoever owes you money will have to pay whoever you passed ownership to.
• Oil, Gas, and Mineral Rights – If you own property with oil, natural gas, or minerals, you can file for rights to them and make partnerships with the government or companies to excavate them.

There is a lot that can go into a trust, but there is also a lot that cannot go into a trust, some of which are similar to things you can. This includes:

• Qualified Retirement Accounts –  This includes 401(k) accounts, 403(b) accounts, IRA accounts, or qualified annuities. You can make trusts the beneficiaries of these accounts, but if you take the money out of these accounts, that amount will have to be taxed. This can drain them to the point that there may be none left by the time it would pass to the trustee.
• Health/Medical Savings Accounts – Similarly to retirement accounts, they have predefined purposes that you cannot change, switch or transfer. Unlike trusts, which are revocable as long as you’re alive, these accounts are irrevocable unless you get rid of them.
• Life Insurance – Life insurance policies are paid by an insurance company with money that is technically not yours. They also already have beneficiaries that you had to have already set. A trust cannot change the intended beneficiaries.
• Another Trust – If you were to try making one trust the trustee of another trust, one would just subsume the other, leaving there to be ultimately one trust.

Contact Tressler & Associates to Make a Trust

Making a trust without an estate planning attorney can cause problems for your estate and loved ones later. Work with an experienced estate planning attorney, such as those at Tressler & Associates, so we can make sure everything is correct. You don’t want anything going to the wrong person or even the state government rather than your loved ones. Contact Tressler & Associates for help creating a trust.