If you have worked hard your entire life and amassed a considerable amount of wealth, you certainly want to pass something down to the people and causes you care about upon your death. And while there are many ways of passing down wealth to the next generation (like giving away gifts), one of the most effective tools you can use to safeguard your legacy involves setting up a trust.
There are basically two types of trusts: revocable and irrevocable trusts. In order to choose the right trust for your estate planning goals, it helps to start off by understanding how each trust works.
Understanding revocable trusts
A revocable trust, as the name suggests, can be amended at any time during your life, provided that you are mentally capable of making an enforceable change. The ability to add or remove assets or even change the beneficiaries makes a revocable trust incredibly flexible.
Here are just a few of the circumstances when setting up a revocable trust can make sense:
- When you want to avoid the challenges associated with probate
- When you want to transfer some of your assets during your lifetime, subject to specific conditions
- When your assets do not qualify for federal estate exemptions
Understanding irrevocable trusts
An irrevocable trust, on the other hand, does not offer much flexibility. Once set up, you may not change or modify it except with a court order. That said, an irrevocable trust can be helpful when you want to accomplish any of the following:
- Protect your estate from creditors and certain taxes
- Give full control of your assets to the trust
Safeguarding your interests
A trust is one of the most effective estate planning tools you can set up. Seeking legal guidance to learn more about Texas trusts laws can help you to set up the right trust for your unique estate planning goals.
