If you have decided upon creating a trust as a part of your estate plan, it's now time for you to think about the details. There are many trusts to choose from, all of which offer certain benefits and restrictions.
The first question you should ask yourself when deciding on the type of trust for you is whether you want to set up a revocable or an irrevocable trust. These are the two main categories of trusts, and they have very different implications.
What are the advantages of an irrevocable trust?
An irrevocable trust is often known as a living trust. This trust is set up during the estate planner's lifetime. Once it is created, it cannot be revoked, which means that it offers limited flexibility. However, the major benefit of an irrevocable trust is the fact that it will never be subject to the costly process of probate. This is because, legally speaking, the assets contained in the trust will not belong to the estate planner at the time of his or her death.
What are the advantages of a revocable trust?
Bearing in mind the limitations of an irrevocable trust, the clear benefit of a revocable trust is the fact that it can be changed or dismantled at any point in the estate planner's lifetime. This is because the trust is not actually set up until the estate planner passes away. However, this means that the trust will be subject to probate.
Can I take advantage of both?
Many people choose to reap the benefits of both types of trusts, keeping different assets in each.
If you are planning your estate, it is important to consider all types of trusts and the advantages they might have for you.