Creating an estate plan that moves your assets to your beneficiaries when you pass away isn’t always easy because you have to face the fact that you won’t be around forever. Many people think that writing out a will is sufficient; however, that’s not always the most effective estate planning tool.
A trust is likely a more effective way to get assets where you want them after you pass away. Before you get started with creating a trust, there are a few things you should know about them. This may help you to determine the best type of trust to use for the purposes you have in mind.
#1: Trusts are revocable or irrevocable
Trusts are classified as either revocable or irrevocable. A revocable trust can be changed as the creator sees fit. An irrevocable trust can’t be changed unless the creator gets permission from the beneficiaries to make changes. All trusts are classified as one of these two options when it’s created. For example, a Totten trust is always a revocable trust because you can change it when you decide that you want someone different to have the contents of your bank account when you die.
#2: Trusts are testamentary or living
Another classification for trusts has to do when they’re formed. A living trust is created while the creator is still alive. This type of trust is sometimes called an inter vivos trust. The opposite of this type of trust is a testamentary trust, which is created after the creator passes away.
#3: Trusts can provide valuable protection
The type of trust you set up determines what type of protection the assets have. For example, an irrevocable trust provides protection from the creator’s creditors because the creator doesn’t have control of the assets once the trust is funded. Certain trusts also have tax breaks.
A trust is only one component of your estate plan. Setting everything up so it forms a comprehensive plan is important. It might be easier to do this if you work with someone who’s familiar with cases similar with yours so they can help you determine how to proceed.