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Differences Between a Revocable Trust and an Irrevocable Trust

Rarick Trusts & Wills Law, P.A. — Thu, 24 Apr 2025 13:00:00 GMT

Differences Between a Revocable Trust and an Irrevocable Trust

By Phil Rarick, Weston Trust Attorney, and Jasmine Benitez, Legal Assistant

When planning your estate, choosing the right type of trust is crucial. Two of the most common options are revocable trusts and irrevocable trusts. While revocable and irrevocable trusts serve important roles in managing and distributing your assets, they differ in key ways. Here’s a quick overview to help you understand the differences.

What is a Revocable Trust?

The “master instructions” for most estate plans is a revocable trust because of the unlimited flexibility provided by this type of trust. Also known as a living trust or family trust, this trust allows the grantor to maintain total control over the assets in the trust. You can change, modify, or revoke the trust at any time. This flexibility makes it ideal for people who want to retain control over their estate plan while avoiding the lengthy and costly probate process.

Note: A common misunderstanding about revocable trusts is that they provide asset protection for assets owned by the trust.

The revocable trust is an important legal tool to avoid guardianship and probate, but it does not provide asset protection because the assets are still considered part of your estate. Therefore, unless otherwise protected by Florida law, the assets in a revocable trust are exposed to creditors.

What is an Irrevocable Trust?

An irrevocable trust is a trust that, once created, cannot be altered or revoked. The grantor relinquishes direct control over the assets transferred into the trust but indirectly controls the assets because the trustee must follow the trust instructions. If properly structured, this type of trust offers significant benefits, such as asset protection and estate tax reduction. Since the assets are no longer part of the grantor’s estate, they are typically protected from creditors and legal claims.

Note: Florida does not recognize self-settled trusts or irrevocable trusts as an asset protection entity. A self-settled trust is one in which the grantor is also the beneficiary. A possible asset protection irrevocable trust in Florida for a married couple is a SLAT-spousal lifetime access trust, where one spouse is the grantor and the other is a beneficiary.

Key Differences Between the Two

Control: In a revocable trust, you retain control and can make changes. In an irrevocable trust, you give up control permanently.
Asset Protection: Irrevocable trusts can offer better asset protection, while revocable trusts leave your assets exposed to creditors.
Taxes: Revocable trusts don’t provide tax benefits, as the assets remain in your estate. Irrevocable trusts can help reduce estate taxes and may offer favorable tax treatment.
Flexibility: Revocable trusts are more flexible and adaptable to life changes, while irrevocable trusts are permanent once established.

Which One Is Right for You?

Revocable Trust: For most persons, a living revocable trust should be the centerpiece of your estate plan because it provides total flexibility while avoiding probate.
Irrevocable Trust: An option for those seeking asset protection, tax benefits, and reduced estate taxes.

Conclusion

Both revocable and irrevocable trusts have their advantages. If you need help deciding which trust is right for your needs, consult with an experienced estate planning attorney. We can guide you through the process and help you make the best decision for your future.

For more information, contact Phil Rarick, Weston Trust Attorney, at info@raricklaw.com.

Special Note

The information on this blog is of a general nature and is not intended to answer any individual’s legal questions. Do not rely on the information presented herein to address your individual legal concerns. If you have a legal question about your individual facts and circumstances, you should consult an attorney who is experienced in Florida trust law. Your receipt of information from this website, blog, or Miami trust attorney does not create an attorney-client relationship and the legal privileges inherent therein.

How Do I Choose a Trustee?

Rarick Trusts & Wills Law, P.A. — Thu, 17 Apr 2025 13:00:00 GMT

How Do I Choose a Trustee?

By Phil Rarick, Miami Trust Attorney, and Jasmine Benitez, Legal Assistant

Choosing a trustee is one of the most important decisions you will make when creating a trust. A trust is simply legally binding instructions, and you must be confident that your trustee will follow these instructions exactly and consistently with your intent. The trustee will be responsible for managing and distributing your investments and properties in a smart and prudent way that benefits you during your lifetime and after the death of your beneficiaries.

As a Miami Trust attorney with over 30 years of experience – and father of 3 adult children – here are four key factors I have learned over the years to consider when choosing a trustee:

1. The Trustee Does Not Need to Be a Financial Expert

Many people mistakenly believe that a trustee must have a background in finance or law. While having a financial or legal background can certainly be helpful, it’s not a requirement for most trusts.

You do not need a Warren Buffett type to act as a Trustee – the most important quality is a person who is reliable and trustworthy – the Trustee can always hire an experienced Certified Financial Planner to manage investments.

2. Someone You Trust (Close Family or Friend)

Choosing a trustee who is someone you trust implicitly is critical. This individual will be responsible for managing your assets in a way that honors your intentions, whether that’s providing for loved ones, making charitable donations, or following other instructions you’ve set.

Note: The first and primary purpose of having a trust is to make sure that your lifestyle is protected in the manner that you are accustomed to living. If every dime is needed during your life, then it is the Trustee’s responsibility to make sure that your needs always come first.

Many people choose a close family member or friend to serve as trustee because they know your values and priorities. For example, a child, sibling, or trusted friend may have a good understanding of your desires when it comes to distributing assets or taking care of specific instructions, such as funding education or healthcare for your children.

3. Always Consider a Successor Trustee

It is always important to have a successor trustee who can step in if the first Trustee is unable to serve. It is good to have a short batting order of successor Trustees: a first, second, and third trustee, if possible.

In some cases, people choose a successor trustee from a different generation or a trusted professional, such as a licensed trust attorney or trust company, to ensure the trust is managed seamlessly.

Note: A Trust never fails for lack of a Trustee. But every good Trust should identify who would have the authority to name a successor Trustee if the original Trustees are unable to serve.

4. Discuss Your Choices with an Estate Planning Attorney Experienced in Trust Administration

Some estate planning attorneys are not experienced in the field of Trust Administration.

This is where the rubber meets the road: where your trust instructions are implemented and hopefully in a cost-effective manner. Some estate planning attorneys avoid this type of work because it can be challenging if the attorney does not have experienced paralegals to manage much of the work.

Conclusion: As Miami Trust attorneys, Rarick Trusts & Wills Law has over 50 years of collective experience in drafting trusts and trust administration. We can help you establish a trust that can be efficiently administered according to your instructions.

Notice: This article is intended for informational purposes only. It is important you consult with an experienced Miami Trust attorney. For more information, contact Attorney Phil Rarick at (305) 709-2858 or by email at prarick@raricklaw.com.

5 Quick Tips On Maxing Out Loan Forgiveness

Rarick Trusts & Wills Law, P.A. — Fri, 17 Apr 2020 04:06:38 GMT

by: attorney Phillip B. Rarick

You can always count on the Americans to do the right thing – after they’ve tried everything else. – Winston Churchill.

Millions of small business owners and self-employed have filed for loans under the Paycheck Protection Program because part or all of the loan can be forgiven if you retain your employees and maintain their salary levels.

Okay, we know, as of this writing, millions have applied and few have received!

But assuming SBA gets through this current bottle-neck and the funding starts to flow, then your focus will be on maxing out the amount that can be forgiven.

The SBA will forgive the part of your loan that covers the first eight weeks of payroll, mortgage interest, rent, and utility payments immediately after you receive funding. You must use 75% of the borrowed loan for payroll costs; only 25% can be for mortgage interest, rent, and utilities.

The SBA will not forgive the portion of the loan used for other expenses; this part of the loan will be maintained at a 2 year loan at 1% interest rate. Loan payments are deferred for the first 6 months of the loan although interest will accrue during this time.

So even if part of your loan is not forgiven, the loan terms are exceptionally favorable for you – maybe this explains why many banks have been lying low in the grass and not soliciting applications because they simply do not want to take on a boat-load of low interest rate loans or short term loans that are quickly forgiven.

So here are 5 quick tips for maxing out your loan forgiveness:

If possible, do not reduce the number of full time employees during the 8 week period. The SBA will do a Head Count Analysis for this period and reduce the forgivable portion of your loan according to a head count formula.

Note #1: The CARES Act allows the business to remedy the forgiveness amount by June 30, 2020, but it is still unclear how mechanically you do this. Expect further SBA guidance on this point.

If possible, do not reduce employee salaries during the 8 week period. The SBA will do a Wage Analysis and reduce the forgivable portion according to their wage analysis formula for any such reduction. But see Note #1 above.
Keep the loan funds in a separate bank account and only withdraw to cover eligible expenses.
Keep a separate expense account to accumulate all eligible costs.
Document all eligible costs.

For a deep dive into the tax benefits for small business under the CARES act I highly recommend for other attorneys and professional advisors the recent webinar by estate tax lawyer, super-guru and friend Alan Gassman: Update On The Paycheck Protection Act Loan Rules.

One Thing Every Parent Should Have For Their Children – Instructions!

Rarick Trusts & Wills Law, P.A. — Tue, 03 Sep 2019 18:56:51 GMT

One Thing Every Parent Should Have For Their Children – Instructions!

By Phil Rarick, Weston Estate Planning Attorney

You and your spouse are finally going out for the evening. The babysitter, a high school student, has arrived and you are loading the young woman with last-minute instructions: time for bed, make sure the kids brush their teeth, books to read little Tommy, etc, etc. What is ironic is many such fretful parents leave more instructions for their babysitter when they are out for a brief night out than they would if they suddenly died.

Many parents have life insurance to provide for their spouse and children. What is missing here is that life insurance without detailed instructions could mean that your son or daughter gets a windfall when they turn 18 and then proceed to blow it on a hot car and high living – your dream of them getting a quality post high school education is up in smoke.

What is needed are detailed legally binding instructions that help your children avoid the big three threats for when they turn 18 and become beneficiaries of money:

Threat #1: They will blow it.
Threat #2: Credit card debt or student loan debt may drain it.
Threat #3: They get married young and a spouse takes it all in a divorce

The one thing every parent should have for their children – before you buy that life insurance policy – are instructions to make sure every dime is spent in a smart way for your children – such as getting a good college or university degree. The legal term for these instructions is a living revocable trust. A good living trust will have strong protection against the three threats mentioned above. It will have robust protections against creditors and will provide a safe harbor to protect these funds if your child gets married without a prenup. (Let’s face it, most young people are not going to get a prenup for their 1^st marriage – it is just not the most romantic thing to do!) A living trust will name a trusted family member or friend who can manage the funds for the children until they reach an age where they have become good money managers and can prudently manage the funds in their best interests.

Take-Away Point: Do not delay – prepare a living revocable trust with detailed instructions to protect your children from the uncertainties of life.

Special Note

The information on this blog is of a general nature and is not intended to answer any individual’s legal questions. Do not rely on information presented herein to address your individual legal concerns. If you have a legal question about your individual facts and circumstances, you should consult an experienced Weston estate planning attorney. Your receipt of information from this website or blog does not create an attorney-client relationship and the legal privileges inherent therein.

When Bad Things Happen To Good Families: Keeping Peace In The Family Upon Death Of Family Matriarch Or Patriarch

Rarick Trusts & Wills Law, P.A. — Tue, 29 Jan 2019 21:43:19 GMT

By: Phil Rarick, Esq. A Short Story With a Big Lesson

Everyone admired the Anderson family. Walter and Joan had 5 children and had worked hard all their lives to give their children the best of American life: each child received a car when they were a junior in high school – provided they had a 3.2 GPA. Two children went to FSU, two went to University of Miami, and one to Cornell. They all enjoyed the benefits from Walter and Joan’s small business – a flower import business next to the Miami airport. Walter and Joan had started the business 45 years ago, the year they were married, and it had grown into a business with 19 employees and many good customers including Publix.

All children were now married and Walter and Joan had 7 grandchildren. However, only one child, Felix, was interested in the business. Felix had been working in the business since he graduated from Cornell. Every year, without fail, the children and grandchildren gathered at the luxurious home of Walter and Joan with a massive, 2,000 sq. ft. pool – and a Tiki Hut bar and grill next to the pool – for the 4^th of July, Thanksgiving, Christmas and New Year’s Eve holidays.

As in every family there were family disputes. But Walter and Joan ruled the family with an iron hand. Whenever there was a problem, the final word belonged to Walter and Joan: all the children respected their decisions. The children did ask their parents to sit down with an experienced estate planning attorney and Walter and Joan agreed, but they could never find time in their busy schedule to set up a meeting with an attorney.

Suddenly, at age 81, Walter had a stroke that left him mentally impaired and within two weeks of Walter’s stroke Joan, at age 76, had a heart attack and died. Neither Walter nor Joan had a trust or will. The family almost immediately plunged into internal fights and bitterness. Felix with his brother filed a Petition to be named Guardian for Walter; the other three children filed a counter-petition asking to be named Guardian. The Guardianship battle lasted for over 2 years and cost over $150,000. Before the court could name a permanent Guardian, Walter died.

The case is now in probate and attorney probate fees are in excess of $200,000. Felix filed another costly lawsuit against his siblings claiming that he should have 51% interest in the flower business because he had been working in the flower shop for the last 10 years without any help from his siblings and had helped grow the business. Because of the lawsuit, the business has declined; valuation experts say the business is now worth only thirty cents on the dollar.

The families no longer gather for Thanksgiving or any of the other holidays. The grandchildren have grown apart.

Take-Away Points

Leave clear instructions – and don’t procrastinate. Most likely, all of these problems could have been avoided had Walter and Joan left clear instructions on such critical issues as who would take charge if they became mentally incapacitated and how the flower business would be divided upon death. A living trust is simply this: clear instructions in the event of incapacity or death. This is why virtually every family – no matter how cohesive and bonded – needs a living trust.
Plan Now. While Walter and Joan were fully mentally capable, all the children respected their decisions. The family problems erupted when Walter had a devastating stroke and Joan died. We are all mortal – plan ahead.

3 Ways Your Thoughtful Florida Will Can Be Made Meaningless

Rarick Trusts & Wills Law, P.A. — Wed, 23 Jan 2019 18:53:23 GMT

By: Phil Rarick

Here is a scenario we see more and more with persons who try to do estate planning themselves, specifically Florida Wills, without consulting with an experienced estate planning attorney. Louise has three adult daughters, Erma, Madeline, and Roseanne. The daughters are all close and speak to each other at least once a week. Louise wants to treat them all equally. Louise has four major assets: her home, a traditional IRA, a checking account, and a savings account.

Louise downloads a Florida Will form on the internet and says each child is to get one-third of everything she might own at death. She is careful to sign the will before a notary and two witnesses with a “Self-Proving Affidavit”. Louise dies, and the daughters schedule a meeting with a Probate Attorney. At the meeting the probate attorney informs the daughters that the Will is good under Florida law. However, despite the Will, 100% of the assets go to Erma. Madeline and Roseanne are not happy. How can this happen?

Home. Louise wanted to avoid probate. She thought a simple way to avoid probate was to title the home in her name and Erma’s name as Joint Tenants With Right of Survivorship. She had a friend draft the deed for her home. The house did avoid a probate process, but upon her death, the house transferred to Erma by operation of law; Madeline and Roseanne received nothing.

Traditional IRA. Louise had an IRA that she set up many years ago when Erma was born, and before Madeline and Roseanne were born. She never thought to check the beneficiaries named on the IRA or maybe she thought the Will would over-ride any beneficiary designations on the IRA (they do not). Therefore, 100% of the IRA transferred to Erma.

Checking and Savings Account. Three years prior to her death, Louise had trouble keeping up with the property taxes on her house and paying bills. As a convenience, she went to the bank and retitled the checking accounts in her name and Erma, as JTWROS – joint tenants with right of survivorship. Again, by operation of law, upon her death the checking account and savings account transferred 100% to Erma.

Some persons have the mistaken idea that a signed and executed Florida Will over-rides beneficiary designations on life insurance, annuities or assets such as those owned by Louise. They do not.

How The Story Ends. Louise did avoid the costs of probate – but at a high cost to her family. Erma has two children and recently was forced to retire early. She explained to her sisters that she really needs the inheritance and cannot share it with them. After all, the probate attorney advised her that the law says she is the sole beneficiary. Madeline and Roseanne no longer talk to Erma.

There are many ways to avoid these issues from arising in your family. If you wish to consult with an experienced Weston Estate Planning attorney contact Phil Rarick at 305-709-2858.

Special Note

The information on this blog is of a general nature and is not intended to answer any individual’s legal questions. Do not rely on information presented herein to address your individual legal concerns. If you have a legal question about your individual facts and circumstances, you should consult an experienced Weston Estate Planning attorney. Your receipt of information from this website or blog does not create an attorney-client relationship and the legal privileges inherent therein.