Trusts are powerful estate planning tools that allow you to manage and distribute your assets according to your wishes – all the while minimizing probate and tax problems. They’re increasingly popular among people at all income levels when it comes time to engage in estate planning.
There are many different kinds of trusts, but each can be classified as revocable or irrevocable. Each kind comes with distinct features that cater to different needs.
What are revocable trusts?
In short, these are trusts that the grantor retains control over during their lifetime. Once created, they can still be modified, amended or outright revoked at the grantor’s discretion. They only become irrevocable once the grantor dies. People like these kinds of trusts because they are flexible. Grantors can add and remove assets and beneficiaries or change the terms for distribution at will. The downside of these trusts is that – because they remain under the grantor’s control – they are not protected against creditor claims.
What are irrevocable trusts?
These are trusts that, once created, cannot be easily changed or canceled. In addition, once assets are placed in the trust, they cannot be removed. Those assets become the property of the trust, and no longer belong to the grantor. These trusts are often valued for their superior asset protection. They’re largely immune from creditor claims against the grantor or beneficiaries, and they may offer significant tax advantages.
Deciding whether a trust is right for your needs (and what type of trust to use) is something that is best done with legal guidance. Early planning can help you create a more secure future for yourself and your loved ones.
