Revocable Trust
When setting up a trust, it must be decided whether it is irrevocable or revocable. This will be written into the trust's deeds by the donor and could make a big difference to the trust's purposes and eventual outcome.
A revocable trust, also known as a living trust or an inter vivos trust, can be modified at any period during the donor's lifetime. This is in contrast to an irrevocable trust which may come into existence posthumously and cannot be altered. The donor of a revocable trust therefore remains in complete management control of his or hers assets. Freedom is given to revoke or change the terms of the trust after the initial signing of contracts and in addition the donor can continue to directly benefit from the assets that have been transferred (i.e. the donor can continue to live in a house which has been placed in a revocable trust).
However, this means that the settlor will continue to be subject to income tax. Furthermore, it is likely to be counted as part of the settlor's estate for the purposes of inheritance tax.
Deciding on which trust to set up is a big decision and may affect the outcome of the trust's assets. If you would like impartial, fee free advice on revocable trusts and if they are the right asset management scheme for you, talk to a member of our partner independent financial advice team:
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