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A brief outline of irrevocable and revocable trusts

Some New York residents may find that establishing a living trust is an attractive option for guiding asset disbursement upon death while avoiding a potentially frustrating probate process. For an individual considering a revocable or irrevocable trust, understanding some basic points regarding these trusts can help an individual to approach the subject more gracefully with a financial advisor or attorney.

Revocable trusts contain provisions that a grantor can change or cancel at any time while still living. They provide grantors with flexibility in handling assets, but they leave those assets unprotected from debt collection and other potential drains.

Irrevocable trusts cannot be altered once finalized without an affected beneficiary's consent. Grantors forfeit access to the assets listed in these trusts, but that forfeiture shelters the assets against creditors, estate tax and other expenses when applicable.

Both of these types of trusts enable wills to be handled without subjecting family members to potential embarrassment or conflict at probate hearings. They also enable benefactors to name successor trustees and guardians to manage funds if neither parent is alive to do so. Trustees require exclusive access to the assets in irrevocable trusts to disburse the funds; either finding a bonded trustee or using a bank may help to insure against losses from careless borrowing.

Consultation with an attorney who is familiar with the complexities of trust administration can help a living benefactor organize his or her wishes as clearly as possible. Upon examining the factors present in a client's financial and family dynamics, a legal professional may see merit in advising a client to seek an irrevocable trust for protection from taxation or a revocable trust to allow the funds to contribute toward long-term debt relief.

Source: NBR, "A matter of trusts: Benefactors, heirs and their advisors", Maureen Niven, August 04, 2014

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