A trust is a key component of estate planning that is used to pass down assets to beneficiaries while avoiding probate and minimizing estate taxes. There are two kinds of trusts that we will discuss in this article: revocable and irrevocable trusts. When you understand the difference, you can weigh the options on which trust is the right kind for your estate planning needs.
Revocable Vs. Irrevocable Trusts
When you learn about estate planning, one of first things you hear about is creating a trust. With a trust, you are able to decide how you want to distribute your assets to your beneficiaries.
Let’s learn the differences between the two trusts:
- Revocable Trusts: With revocable trusts, you still have control over your assets while you are living. If you need to change the terms of your trust, you can do so. For example, if a big life event changes the beneficiaries of the trust, such as a marriage, divorce, birth, or death, then you can make the changes. This trust will also allow you to avoid probate.
On the other hand, revocable trusts are still subject to collection from creditors. Or, if you were to be sued, the assets inside the trust could be at risk.
- Irrevocable Trusts: Irrevocable trusts are a complex legal document to set up. Once you place assets in the irrevocable trust, you relinquish control of those assets. You will not have a chance to add or remove a beneficiary. In addition, you cannot change the amounts to disperse.
The upside of an irrevocable trust is that it is protected from any creditors or lawsuits. Also, you receive tax benefits with this trust.
When you set up a trust, it is up to the trustee to distribute the assets according to the creator of the trust’s rules. You can choose a trustee at the bank or select a trustee that you know will respect and follow through with your wishes, like an adult child or a loved one.
Are you ready to start estate planning? If you would like to set up a trust to secure your assets and protect them if the unexpected were to happen, Shoup Legal is here to help. Contact us at (951) 455-4114 or email us at [email protected] to get started today.