Some of our Michigan readers know exactly what they are looking for when they begin the process of drawing up an estate plan. Most people, however, don't really even know where to start, other than perhaps knowing that a will is probably important to have. The good news is that there are more resources than ever that can help educate a Michigan resident as to the vast range of estate planning options, and one area that is probably cloaked in mystery more than any other is trusts.
If a trust of one kind or another is going to be part of someone's estate plan, that person is likely to seek out information on all of the different types of trusts that could be options. When they do that, however, that person is likely to discover that the array of options is incredibly broad, ranging from trusts designed to maximize tax planning to trusts set up for children with special needs. Every kind of trust has pros and cons to consider, which is why knowing the difference can be especially important. Recognizing the daunting task of considering a trust as part of an estate plan, a recent article addressed one of the most fundamental issues: the difference between a revocable trust and an irrevocable trust.
As the article mentions, a revocable trust is often favored by estate planners because it allows the person who sets up the trust to make changes if needed, or to completely end the trust. Maintaining control over the assets designated for the trust is quite appealing to many people.
On the other hand, an irrevocable trust has benefits as well. When a person transfers assets into an irrevocable trust those assets are no longer considered to be part of the person's estate; they belong to the trust. As a result, those assets are usually completely untouchable by creditors, or in a bankruptcy proceeding or lawsuit. An irrevocable trust can be a great option if the primary goal is protecting inheritance.
Source: LifeHealthPro, "Revocable vs. irrevocable: Which trust is right for your client?" Tom Nawrocki, August 9, 2013