Setting up a plan for what will happen to your assets when you pass away is important. One of the options you have for doing this is to set up trusts that pass specific assets to your heirs.
As you’re going through the different types of trusts, you’ll notice that they’re all classified as either revocable or irrevocable. These are two vastly different classifications, so understanding each of them can help you to determine how to move forward with your estate plan.
What’s an irrevocable trust?
An irrevocable trust is one that you can’t change or dissolve after you create it. The exception to this is if you’re able to obtain permission from the beneficiaries. One of the biggest benefits of an irrevocable trust is that it offers protection from creditors. Your creditors can’t make a claim against the assets of the trust because you don’t have control over the trust. These trusts also offer tax shelter benefits for the income generated by the assets.
What’s a revocable trust?
A revocable trust is one that you can change or dissolve when you want. You retain full control of the trust. The downside to it is that there isn’t any protection from creditors for this type of trust. Your creditors can go after the contents of the trust because you still have control of the assets. This type of trust doesn’t offer tax-shelter benefits.
Creating a comprehensive estate plan may involve establishing trusts. Working with someone familiar with these matters may be beneficial, so you can learn the options and how they may affect your loved ones when you pass away. This may help you make a plan to take care of them when you aren’t here to do it.