Creating an estate plan is something that many adults know they should do, but some adults put this off. If you’re ready to create your estate plan, there are specific things you need to consider. One of these is how you’re going to pass your assets down to your loved ones.
Trusts are one option that you have for doing this. Establishing trusts lets you set the terms for passing down the included assets to your chosen beneficiaries. There are two broad categories of trusts that you’ll come across during this process – revocable and irrevocable.
What are revocable trusts?
A revocable trust is one that enables you to remain in control of the assets as long as you’re living. You can change or even cancel the trust if you decide that it’s not set up how you want it to be. The downside to this type of trust is that it doesn’t remove the assets from your estate and it doesn’t provide any protection from creditors.
What are irrevocable trusts?
An irrevocable trust is one that requires you to relinquish control over the assets in the trust to the trustee. Once you establish the trust, you won’t be able to make changes or cancel it easily. If you want to do either of those, you’ll have to get permission from the court or from the beneficiaries in the trust. On the positive side, the assets are protected from your creditors since you relinquish control and the assets are removed from your estate.
There are other factors that you need to consider when you’re considering trusts. One common consideration is tax effects. Discuss your wishes with someone familiar with estate planning so you can determine how to proceed.