If you’re getting your affairs in order, no doubt you’ve heard about trusts. There are lots of different types, but they generally fall into one of two categories — revocable and irrevocable. Each has its own benefits, so the best choice for you will depend on both your future goals and current situation.
Revocable trusts: An overview
A revocable trust is a trust that can be revoked or altered by the creator of the trust during their lifetime. It’s a good option for you if you want to maintain control over your assets and estate while you’re alive. This trust becomes an irrevocable trust upon your death, which means no one can change it.
There are several benefits of revocable trusts:
- Control: You can be the trustee of your own trust
- Flexibility: You can change the terms and/or beneficiaries of your trust at any time
- No probate: Your beneficiaries will not have to go to court and wait years to inherit your assets
- Continuous management: If you cannot complete your duties, a qualified representative will help. He or she will ensure the assets in your funded trust get managed without interruption.
Irrevocable trusts: An overview
An irrevocable trust cannot be easily modified or terminated during the creator’s lifetime. An irrevocable trust can have a reserved power of appointment which gives the grantor the power to change the beneficiaries or the distribution during their lifetime. However, the creator of the trust cannot be the trustee. An irrevocable trust, however, provides protection against creditors. This kind of trust holds certain benefits:
- Asset protection: Irrevocable trusts protect your assets from legal judgments and creditors
- No probate: Your beneficiaries will not have to go to court and wait years to inherit your assets
- Government benefit access: Creating an irrevocable trust and sheltering your assets can make you eligible for government benefits such as Medicaid community care and nursing home care without depleting your assets.
Why you should establish a trust
The purpose of a trust, whether revocable or irrevocable, is to provide a long-term management structure for your assets. Trusts also spare your loved ones the pain of going through the probate process. They also protect your assets from public records.
Creating a trust will help you protect your estate. It also makes your future wishes known. Choosing between an irrevocable or revocable trust just depends on your specific needs.
