Creating an estate plan requires that you determine the best options for passing your assets to your intended beneficiaries. Wills are one option for doing this, but trusts are another option.
Trusts are an estate planning tool that holds the assets until you pass away, and they’re passed along to the beneficiaries. The trust can manage the assets while you’re living and will handle them after your death. In many cases, this makes it possible to avoid probate.
One of the biggest advantages of using a trust is the ability to specify exactly how and when beneficiaries receive their inheritance. For example, instead of leaving a lump sum to a young adult, you can set rules so they receive money gradually or only for certain purposes, like education or buying a home.
Revocable and irrevocable trusts
While there are many types of trusts, one of the first distinctions is whether a trust is revocable or irrevocable. The primary difference between these is that a revocable trust is easy to change because you retain control over the trust, but an irrevocable trust can only be changed if you can obtain the permission of the jurisdictional court or beneficiaries because you hand control of the assets to the trustee.
An irrevocable trust can provide you with protection from your creditors since you don’t have control of the assets. This means that you can pass down the entirety of the trust’s contents, which is a suitable wealth preservation option for some people. That protection isn’t possible in a revocable trust.
Some people believe that trusts in an estate plan are only for wealthy individuals, but that’s not the case. Trusts are useful for anyone who wants control over the management and distribution of their assets. It’s critical to consider your entire situation to determine if a trust is in your best interests.