People in New York who are creating an estate plan might wonder whether they should use a revocable or irrevocable trust. A revocable trust can be changed at any time in a person’s lifetime while an irrevocable trust cannot, but it does not offer the same protections. An irrevocable trust takes the property placed in it out of the individual’s estate. This means that creditors cannot seize it, and it cannot be taxed as part of the estate.
A revocable trust can be used to plan for mental incapacity. The grantor, or creator of the trust, usually appoints themselves as the trustee, and a successor trustee can take over as necessary. Assets in a revocable trust do not pass through probate, so they go directly to beneficiaries quickly and privately. In contrast, a will is a public document.
The grantor cannot be the trustee of an irrevocable trust. Irrevocable trusts can be used to protect estates from taxes although the exemption is high enough that most individuals do not need them for this purpose. However, an irrevocable trust can also protect assets for beneficiaries in case the grantor must go to a nursing home. There are specific types of irrevocable trusts, such as a life insurance trust that receives benefits when the grantor dies.
People creating an estate plan may want to discuss their needs and goals with an attorney, who might point them to the right vehicles. For example, if a person is worried that a beneficiary might spend money irresponsibly, a revocable trust can be set up that will put a trustee in charge of distributions or that will name specific milestones that trigger distributions. If the beneficiary becomes more responsible, the trust conditions could be changed.