Trusts are an estate planning tool that can help you achieve specific goals. The two main types of trust to consider are revocable and irrevocable. Let’s look at revocable ones.
Revocable trusts give you the flexibility to make changes throughout your lifetime, but that comes at a cost. One is that they will not protect your assets from creditors. If you need that, you need an irrevocable trust, yet you sacrifice the freedom to make changes for that protection.
Why might you want a revocable trust?
The property you put in a trust is managed for you. So, if you become unable to make rational decisions about your own finances for any reason, that property is already protected.
What will stop you from making an unwise change?
If you cannot reason anymore due to illness or injury, the trustee could contest whether you have the mental capacity to make changes. If a court finds you do not have testamentary capacity, it should stop you.
What happens to the trust when you die?
You need to name one or more beneficiaries when you create the trust. Once you pass away, the trust changes to an irrevocable trust. The trust manager should then carry out your wishes and distribute the assets to the beneficiaries in the way you stipulated. They should be able to do so relatively quickly, as trusts do not pass through probate.
Another advantage is that the details of the trust’s contents will be kept private, unlike assets that pass through probate. That could be useful if you want to protect your beneficiaries from the unwanted attention money can bring.
Not everyone needs a revocable trust or any other kind of trust. Yet, only by understanding all your options can you make the best estate plan possible for your needs.