Revocable trusts can be revised or annulled, as the name suggests. In some areas, they’re promoted as “living trusts.”
As a result of all the hype, some people believe that revocable trusts are tax shelters. In reality, though, revocable trusts offer neither income tax nor estate tax savings.
Then why use a revocable trust?
* Assets in such trusts bypass probate, which may be time-consuming and expensive in some states.
* Revocable trust assets can pass seamlessly to a co-trustee or successor trustee, who’ll watch out for your interests in case of your incapacity and continue the trust administration after your death.
However, merely setting up a revocable trust won’t accomplish these goals. You must take the time to have the title to certain assets transferred to the trust, for those assets to be included.
If you desire tax benefits, you must use an irrevocable trust and accept the fact that the assets transferred to such trusts are out of your hands. If you’re willing to give up such control, the assets in a properly structured irrevocable trust will be out of your taxable estate, too.