the grantor creates a revocable trust. However, if that person wishes to waive those rights, he or she may create an irrevocable trust. In an irrevocable trust, the grantor not only gives up the right to the property in the trust, he or she also relinquishes the right to any income pro- duced from those assets. Plus, if any of the grantor’s circumstances change, that person will be unable to alter the trust in any way.
Living Trusts Living trusts may be either revocable or irrevocable, and are estab- lished during the grantor’s lifetime. In a revocable living trust, the grantor retains the rights to the property that is placed inside the trust, as if the grantor were still the owner in name of all the assets. The grantor is then taxed on any income that is produced by the trust’s assets. The major advantages to revocable living trusts are (1) the management continuity and the income stream are guaranteed to last beyond the death of the grantor, (2) any assets that have been placed in the trust won’t have to go through the probate process since the trust will continue to survive after the grantor has died, (3) the trustee is responsible for all management and investment decisions, and (4) all aspects of the living trust, including the amount of assets within the trust are private. Unlike the probate process, which is a matter of public record, the trust documents, named trustees and, all other parts of the trust will remain a private matter even after the death of the grantor. Disadvantages include the cost to set up the trust, as well as any management fees charged by the trustee. Plus, since the grantor still has control over the trust’s assets, they are included as part of the grantor’s estate, and may be subject to estate taxes upon the grantor’s death.
The advantages to setting up an irrevocable living trust are the same as for the revocable living trusts. Irrevocable trusts may also help reduce the amount of taxes paid by the grantor, since the prop- erty is not only removed from the grantor’s estate, any income from the assets is also removed. However, the disadvantages of an irrevo- cable living trust outnumber those of a revocable trust. First, the grantor loses the right to his or her property placed in the trust plus any income generated by these assets. Second, the grantor will not be able to make any changes to the trust, nor rescind it, once it has been