Your estate plan is a way to set instructions for your loved ones to follow if you pass away. It can also provide guidance for what should happen if you become incapacitated. One of the duties of the plan is to dictate who will receive which assets.
A will is one option for making your wishes about assets known, but that’s not the only one. Trusts are another option that you have, and there are several different types that you may encounter when you’re considering one.
What is a trust?
A trust is a legal tool that holds assets while you’re living. Once you pass away, the assets held within the trust are distributed in accordance with your instructions. Any assets that are included in a trust shouldn’t be included in your will.
As you’re looking into trusts you’ll find that each is categorized as revocable or irrevocable. This distinction is important because it has to do with what options you have for the trust once it’s created.
Revocable trusts allow you to change the terms of the trust or even cancel it entirely if you want. The downside to this is that it doesn’t come with the same protections as an irrevocable trust.
Irrevocable trusts are permanent unless you can obtain permission from the court or from the beneficiaries. Once you create the trust, control over it shifts to the trustee. You can’t choose to change or cancel the trust. That permanency comes with the benefit of creditor protection and potential tax reductions.
Trusts are only one part of a comprehensive estate plan. Discussing your wishes with someone familiar with these matters may help you to find the options that will allow your loved ones to follow your wishes.
