Listen to people in Massachusetts talk about estate planning long enough, and the topic of trusts will come up. However, people do not generally go into detail as to just what a revocable or irrevocable trust comprises. There are numerous types of trusts, but most fit into these two main categories.
A revocable trust is a trust that can be revoked during the grantor's lifetime. Assets that were put into the trust may be retitled to the grantor. On the contrary, an irrevocable trust is a trust that cannot be revoked once made.
That may be useful information, but it does not mean much without knowing what a trust is and what it can accomplish. A trust is an entity created by a written document with the intention of holding assets on behalf of the trust's beneficiary. A trustee is appointed to manage the assets of the trust.
In a revocable living trust, the grantor, trustee and beneficiary are often the same person. An alternative trustee is named in the trust in case the primary trustee becomes incapacitated or passes away. At that point, the assets in the trust are to be distributed in accordance with the trust, and the trust ceases to exist. The most common type of irrevocable trust is a testamentary trust that is created in a person's will and becomes operative after death. It cannot be changed since the person that created the trust is no longer living.
There are numerous differences between the provisions of a revocable or irrevocable trust. A Massachusetts trust can contain any terms desired by the grantor so long as they are not contrary to public policy or illegal. This allows the grantor the opportunity to tailor his or her trust to the specific needs of the trust's beneficiary.
Source: fedweek.com, Assessing the different types of trusts, No author, Nov. 21, 2013