As an adult, you probably know that you should have an estate plan in place. The thought of having to take the time to do this may be daunting, but it’s critical that you take care of it as soon as possible. One of the biggest things that an estate plan can do is tell your loved ones who is going to receive which assets.
You can use your will to pass your assets down, but using a trust might be more beneficial, partly because it bypasses the probate process. There are two main types of trusts , revocable and irrevocable. Understanding some of the key differences between these two types of trusts may be beneficial.
Revocable trusts
A revocable trust, which is sometimes called a living trust, allows you to maintain full control over the assets within it as long as you’re alive. This provides you with the ability to change beneficiaries, add assets, remove assets, or dissolve the trust entirely. This is a flexible and convenient way to manage assets in your estate plan.
Irrevocable trusts
An irrevocable trust is one that can’t be altered once it’s created. The exceptions to this are if the court orders a change to the trust or if all of the named beneficiaries agree to the change.
By placing assets in an irrevocable trust, you are essentially giving up ownership and placing it in the hands of the trustee. In exchange for giving up control of the assets, you gain powerful protection for them. An irrevocable trust can shield assets from creditors, reduce estate taxes and help with Medicaid eligibility.
Creating a comprehensive estate plan isn’t always easy, but it’s critical so that you know your wishes can be followed when you pass away. Working with someone who is familiar with these matters may be beneficial, so they can assist you in determining the best way to make your wishes known.
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