Creating a comprehensive estate plan enables you to provide instructions about who will get what when you pass away. You can do this through a will, but that has to go through the probate process. A better option for some people is to establish trusts, which don’t go through the probate process.
All trusts are deemed either revocable or irrevocable. This classification is important because each type has specific benefits and drawbacks. Knowing these may help you to make decisions about what trust is the best for your situation.
What is an irrevocable trust?
An irrevocable trust can’t be changed or dissolved once it’s created unless you have the approval of the beneficiaries. The contents of the trust are controlled by the trustee, so you don’t have any control over them. This type of trust provides protection from creditors. They can’t touch the contents of the trust once it’s funded because you no longer control it. There are also specific tax benefits to these trusts. Additionally, irrevocable trusts don’t have to go through the probate process, so they provide the beneficiaries with more privacy.
What is a revocable trust?
A revocable trust is one that you can change or dissolve at will. This gives you full control over the assets. The downside to this type of trust is that it doesn’t provide you with any protections from creditors. They can file a lawsuit and the trust’s assets would be claimable because you maintain control over those assets.
What else should you know about trusts?
Anything that’s in the trust shouldn’t be named in the will. Passing assets down as part of a trust is much easier. If you do include those assets in the will, the beneficiary information must match exactly in both documents or it can cause issues with the estate.
Creating an estate plan is crucial for all adults. This has several components that work together to ensure your final wishes are clear. Working with someone familiar with your situation and the options for setting up the estate can help make the process easier. Getting this taken care of now can give you peace of mind.