Irrevocable trusts are only useful for tax purposes, and people should not use them to pass assets on to loved ones, advises Suze Orman. On the other hand, revocable living trusts are more important than wills for estate planning, according to Suze Orman.Continue Reading
Irrevocable trusts are unreliable when transferring funds to loved ones because once people establish them, they cannot be changed, states Suze Orman. If loved ones become sick or incapacitated and need the trust money, the financial institution holding the trust is unable to release the funds. Similarly, wills and life insurance policies have limited effectiveness because they release assets only upon death. If the owner becomes incapacitated, there is no way to release the funds when they are needed.
Revocable living trusts that have an incapacity clause allow successor trustees to take over and access assets if the original trustee becomes physically or mentally incapacitated due to an injury or illness, as noted by Suze Orman. Additionally, revocable living trusts allow assets to escape probate upon the death of the trustee. Probate not only takes considerable time before the court releases the funds, but it also involves considerable expense for court costs, probate fees, executor fees and attorney fees.Learn more about Financial Planning