Most adults know that they should have an estate plan in place. This outlines the creator’s wishes to ensure that their loved ones know how to handle their affairs. While many people believe that they only need to have a will, others may be curious about the role of trusts in their estate plan.
One of the first things that a person may notice if they’re looking into trusts is that they aren’t all the same. All trusts are classified as either irrevocable or revocable, depending on the ability of the creator to change the terms after the trust is created.
Irrevocable versus revocable trusts
Irrevocable trusts can’t be changed or canceled after they’re created. The only exceptions to this are if the creator can obtain the permission of either the court or all the beneficiaries. Once it’s created, the trust’s control transitions to a trustee, which takes control of the assets away from the creator. In exchange for the permanency of the trust, the assets in the trust are protected from creditor claims, which is a valuable wealth preservation benefit for many creators since it enables them to pass down as much as possible to their heirs.
The other option is a revocable trust, which can be changed by the creator after it’s set up. Because the creator is still in control of the assets and the trust, they don’t have the protections against creditors.
Regardless of whether a trust is irrevocable or revocable, the assets can bypass the probate process. This can ensure beneficiaries receive them in an efficient manner and provide them with some privacy regarding their inheritance.
It’s critical that all trusts are established and funded properly so they can work as part of a comprehensive estate plan. Working with someone familiar with these matters may be beneficial since they can assist with the entire process.
