Most Americans are familiar with the concept of a will, even if they do not have one themselves. Of course, a well-written will is a cornerstone of any thoughtful estate plan.
However, the options go well beyond a will if you are looking to maximize the power of your estate planning. Living trusts are incredible tools that can help you finesse your assets in multiple ways for the benefit of your heirs. The two types of living trusts are revocable and irrevocable.
What is a revocable trust?
With a revocable trust, you can make as many changes as you like to the trust until you die. Anything that you put into a revocable trust also remains your legal property until death.
The main benefit to a revocable trust is that it will help your heirs avoid probate. Anything that you pass down through a will must go through the probate process, which can be expensive and time-consuming. Plus, any of your assets that the probate courts hold up will not go to your heirs until probate is through. Revocable trusts offer greater privacy and quicker inheritance for your heirs.
What is an irrevocable trust?
With an irrevocable trust, the moment you create the trust you may not make any changes to it. Additionally, anything that you put into an irrevocable trust becomes the property of the trust itself. It is no longer your property once it goes into an irrevocable trust.
Irrevocable trusts help your heirs avoid estate taxes. Irrevocable trusts can also protect your assets from creditors. However, if the law finds that you have created an irrevocable trust to fraud creditors, there are legal ramifications to this.
