A revocable trust is a type of trust fund in which the grantor that creates the trust retains the legal right to collect the income created by the trust fund and modify the trust whenever he wants. Because of the degree of control that the grantor retains—he can cancel the trust and take the proceeds and spend them however he pleases—the grantor actually has to pay taxes on the income generated by the trust. If he chooses to distribute some of this money to another beneficiary rather than himself, the beneficiary does not have to pay taxes on his distribution because the grantor/creator of the trust has already paid taxes on it.
What must you do if you want to want to lower your tax bill? You must give up control and create an irrevocable trust.
The trade-off of creating an irrevocable trust is that you must give up two … Read the rest of this article!