How are revocable and irrevocable trusts different?

On Behalf of | Aug 23, 2021 | Estate Planning |

Living trusts are extremely powerful estate planning tools to add to your arsenal. Sadly, many Americans are not aware of living trusts, nor how they can streamline your estate planning. Proper use of trusts can help your beneficiaries gain access to your assets faster after your death, and in some instances, they can even help your estate avoid taxes.

The two major varieties of a living trust are revocable and irrevocable. According to Experian, the proper use of living trusts allow you to deftly manipulate your assets.

Revocable trust

This is the more flexible variety of living trust. You can make as many changes as you like to a revocable living trust before your death. Anything that is inside of a revocable living trust also remains your personal property as long as you are alive.

The biggest plus to a revocable trust is that it will allow your assets to avoid probate. Any asset that is inside of a revocable trust can go immediately to your desired beneficiaries, as opposed to getting held up in probate for potentially months or years.

Irrevocable trust

Once you create an irrevocable trust and fill it, you cannot make any changes to it once you sign the paperwork. Additionally, anything inside of an irrevocable trust is now the property of the trust. It is no longer yours.

Irrevocable trusts can help your estate avoid estate taxes since the assets inside of it are not your personal property. Anything inside of an irrevocable trust also gains protection from creditors for the same reason. The proper use of a revocable and irrevocable trust can help you ensure that your assets remain protected and get to where they need to go as quickly as possible.