You’ve worked hard your entire life to build what you own today (your home, savings and other assets). This also means that you need to plan for what will happen to your hard-earned assets when you pass on. And this is where estate planning comes in.
One of the most important estate planning tools you can use to allot assets to the people and causes you care about is the trust. Basically, this legal document allows you to distribute your assets during your lifetime or upon your demise.
There are generally two main types of trusts: a revocable and an irrevocable trust. So how do you choose the right one for your estate planning needs? Well, to answer this question, it helps to understand how the two types of trusts work:
Understanding revocable trusts
As the name suggests, you can revoke a revocable. This means that you can change its instruments or update it as per your needs as long as you are alive and has the testamentary capacity to do so. If you are looking to set up a trust that you control, then you might want to consider setting up a revocable trust. A revocable trust ensures that you are in control of the assets placed on it. It also ensures flexibility while avoiding probate.
Understanding irrevocable trust
This is the opposite of a revocable trust. Once created, you cannot easily modify, amend or terminate a revocable trust without a court order or the consent of the beneficiaries. An irrevocable trust can help you escape certain estate taxes, avoid probate and protect the assets placed on it from judgments and creditors.
A trust is an excellent estate planning tool with a myriad of benefits. Find out how you can create a trust that meets your estate planning needs.
