A trust is a legal tool that allows the creator to have greater control over his or her assets. Depending on the structure of the trust, the legal tool can result in tax benefits, shelter assets from creditors and even guide how money is used in the future.
There are many different types of trusts. One of the first decisions to make involves whether the trust will be revocable or irrevocable.
Definitions: A revocable trust allows the creator to revoke or rewrite the terms of the trust agreement as they see fit. An irrevocable trust does not. In an irrevocable trust, the creator essentially gives up control of the assets.
Benefits: A revocable trust will allow the creator the ability to transfer assets and avoid probate. Probate is a public court process. Using a trust to avoid this process helps better ensure privacy. It also provides for continued management of assets in the event the owner becomes incapacitated. This reduces the time, frustrations and additional court costs that loved ones can face dealing with your estate if you are the victim of an accident or become ill.
An irrevocable trust can provide more benefits to the creator than the revocable trust, but in exchange for less control. To set up an irrevocable trust, the creator must generally forfeit control of the assets. It is much more difficult to change the terms of an irrevocable trust. In the simplest of terms, the most benefits are available when the creator has the least amount of control over the trust. These benefits can include tax savings and the ability to shelter the assets from creditors.
Decisions: Choosing the right trust instrument for your estate planning needs requires a careful review of the implications of each option. An attorney experienced in these matters can help guide this discussion and better ensure