what is the difference between a revocable or irrevocable trust?
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A revocable trust and living trust are separate terms that describe the same thing: a trust in which the terms can be changed at any time. An irrevocable trust describes a trust that cannot be modified after it is created without the consent of the beneficiaries.
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Irrevocable trusts, on the other hand, can be established either during the settlor's lifetime or after their death. ... As such, any income that is derived from the assets in trust continues to be taxed as if it were part of the settlor's estate.
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A trust is irrevocable because the grantor may not revoke the trust alone. However, in New York you may revoke an irrevocable trust if all parties consent in writing to the revocation of the trust.
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A "revocable" trust is one that may be changed or rescinded by the person who created it. Medicaid considers the principal of such trusts (that is, the funds that make up the trust) to be assets that are countable in determining Medicaid eligibility. Thus, revocable trusts are of no use in Medicaid planning.
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Assets held in an irrevocable trust are not included in the grantor's taxable estate (passing to the grantor's designated beneficiaries free of estate tax). ... The grantor of a revocable trust simply treats all of the assets of the trust as his or her own income for tax purposes.
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When you create an irrevocable trust, you surrenders ownership over the trust assets; you cannot unilaterally regain control of the property. ... Although laws vary among states, there are cases in which a creditor can “pierce” the trust shield to obtain trust assets as a means of settling outstanding debts.
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As discussed above, irrevocable trusts are not completely irrevocable; they can be modified or dissolved, but the settlor may not do so unilaterally. The most common mechanisms for modifying or dissolving an irrevocable trust are modification by consent and judicial modification.
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An inter-vivos trust is an estate planning vehicle that can own the assets during the trustor's lifetime. ... A living trust is revocable, which means any of the provisions and designations can be changed while the trustor is alive.
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The grantor, having effectively transferred all ownership of assets into the trust, legally removes all of their rights of ownership to the assets and the trust. Irrevocable trusts cannot be modified after they are created, or at least they are very difficult to modify.
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All beneficiaries who have any chance of receiving property must agree to the revocation. An irrevocable trust can be terminated by consent even if the termination is contrary to a material purpose of the trust, which means the trust cannot fulfill its purpose.
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An irrevocable trust has a grantor, a trustee, and a beneficiary or beneficiaries. Once the grantor places an asset in an irrevocable trust, it is a gift to the trust and the grantor cannot revoke it. ... To take advantage of the estate tax exemption and remove taxable assets from the estate.
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An irrevocable trust is created when you transfer your assets or property to a trustee and relinquish control of them. Irrevocable trusts come with significant tax and estate-planning benefits, but unlike revocable trusts, irrevocable trusts generally can't be modified or canceled by you, the trust creator.
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A living trust is, quite simply, a trust that goes into effect while you're alive. As a result, living trusts can be either revocable or irrevocable, depending upon how they're set up. ... In that light, the family trust is then relegated to covering only those trusts that are designed to provide assets to family members.
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So, to be absolutely clear: A revocable living trust does not protect assets from creditors. What Is an Irrevocable Trust? An irrevocable trust, on the other hand, may protect assets from creditors. In fact, you may see the term “asset protection trust" used to describe such a trust.
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A revocable trust has only one advantage for the grantor and beneficiaries: the trust does not have to go through probate court, an often time-consuming and expensive process. ... A blind trust is revocable; the grantor can cancel the trust at any time, and transfer responsibility to a different trustee.
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If marital property is placed in an irrevocable trust, that trust cannot be changed and the assets in it cannot be removed and divided in the divorce. The trust assets remain in the trust until after the death of the grantor, when they are distributed to the beneficiaries in accordance with the trust's terms.
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A revocable trust is a method of protecting assets from probate should the grantor of the trust die. An irrevocable trust is one that cannot be modified by the grantor. Upon the death of the grantor, a revocable trust automatically becomes irrevocable.