All adults should have a comprehensive estate plan in place that accurately reflects their wishes. Trusts are one way for testators to pass along to their beneficiaries the assets they want them to have.
If you’re creating an estate plan and are considering trusts, there are two specific categories that you should get familiar with – revocable and irrevocable. While trusts in both categories have the goal of passing along assets to beneficiaries, there are some very specific differences.
What are revocable trusts?
Revocable trusts are ones that you can alter or cancel at any time. You retain complete control over the assets that are held in the trust. The downside to this is that the assets in this trust aren’t protected from creditors because you still have control over them.
What are irrevocable trusts?
Irrevocable trusts are ones that can’t be changed or canceled until the court or beneficiaries agree. Once you establish the trust, a trustee takes control of the assets. Without you having control over these assets, they have protection from creditors. This means that if you have a legal claim against you, the assets in the trust are safe for you to pass down to your loved ones.
What benefits are universal between both categories?
One of the biggest benefits to any trust is that the beneficiaries have more privacy than they do if assets are passed down through the will. Trusts don’t go through the probate process, so they don’t become part of the public record. Another benefit of a trust is that they provide a direct way for the assets to get handed down to your beneficiaries. This enables you to care for your beneficiaries without them having to go through the lengthy and costly probate process.
Trusts are only one part of a comprehensive estate plan. Working with a legal representative who can help you to set up your broader plan in ways that meet your needs can provide you with greater peace of mind. It can also give your loved ones a clear plan about what to do at the end of your life and with your assets after you die.