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From Revocable to Irrevocable

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									                                 From Revocable to Irrevocable

                                      By Matthew Crider, JD
                                 Family Wealth Protection Attorney

      We’ve dedicated a lot of time to explaining the mechanics of revocable living trusts and
      how they fit into your estate plan alongside a last will and testament, living will, and
      medical directives. There’s one feature that we haven’t talked about very much, and
      that is the option to have your revocable living trust convert into an irrevocable trust
      upon your passing.



      The Distinction Between Revocable and Irrevocable Trusts

      There are many purposes for creating an irrevocable trust, but the primary purpose is
      asset protection. Trusts allow people to separate ownership and control of assets from
      beneficial use of the same assets. That’s important because ownership of assets is
      what counts when it comes to lawsuits and other liabilities. For example, if a person
      who is the beneficiary of an irrevocable trust is sued and loses the suit, the assets held
      in the trust are protected—they cannot be obtained by the plaintiff—assuming the
      irrevocable trust was set up properly.

      Revocable living trusts are, by their nature, not intended to shield assets from creditors
      or provide any measure of protection from lawsuits. That’s because the purpose of a
      revocable trust is to avoid probate court, which is where estates are typically settled if
      there is only a last will. Revocable trusts do not separate control from beneficial use.
      Rather, such trusts hold and technically own assets as opposed to the same assets
      being owned by an individual (and the individual’s estate upon death). So because
      control and beneficial use are not separated, creditors can access assets held in
      revocable trusts.

      In short, irrevocable trusts provide very strong protection for assets. Revocable trusts
      do not.



      Getting the Best of Both Worlds

      Many people—many of our clients—are not concerned about personal liability. The
      reasons for that are numerous: Adequate insurance coverage, low-risk professions, and
      conservative lifestyles are among those reasons. Those same people, however, are
      often very concerned about the safety of their assets in the hands of their heirs, in the

      hands of loved ones who are either not astute at managing assets or who are possibly
      the targets of lawsuits.




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                                  From Revocable to Irrevocable


      In such cases, you can choose to have your revocable living trust turn into an
      irrevocable trust at the time of your death. This “triggering” can have a variety of
      effects. First, it will allow you to have your assets held in trust for a specified period of
      time following your death. The rules regarding how long the delivery of your assets can
      be delayed is an extremely complex area of law, which is why you probably need an
      attorney to help you.

      The second effect is that even though income from your assets can be paid to your
      heirs after your death, the assets themselves—the “corpus” of the trust—will be
      protected from creditor claims, assuming your trust is initially drafted correctly. Finally,
      through the use of such a trust, your estate will likely be totally exempt from costly and
      potentially unpredictable probate proceedings. Of course the best benefit is that you will
      retain full control and use of your assets while you’re alive.



      Proper Drafting

      There are many very specific legal requirements that must be met in order to create the
      type of trust described above. If you think that a revocable living trust that becomes
      irrevocable would suit your planning needs, then contact our office today and we will
      work with you to craft a unique document that meets your specific requirements. Again,
      this is not the type of drafting that should be trusted to amateurs, because it is a
      complex area of law and requires a lot of precise drafting. We normally charge $750 for
      a Family Wealth Planning Session, but if you call our office today and mention this
      article by name, we’ll meet with you for free!



      About Matthew Crider, J.D.

      Matthew Crider formed Crider Law PC in 1999 so he could help
      individuals and business owners by providing creative solutions and
      be their trusted advisor and legal counselor. He serves his clients
      by listening closely to their goals, dreams and concerns and
      working with them to develop superior and comprehensive estate
      and asset protection plans. His estate planning practice focuses on
      preserving and growing wealth by providing comprehensive, highly
      personalized estate planning counsel to couples, families,
      individuals and businesses.




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