Many people know the power of wills and why it is important to have one in place before you die. However, a will is not the only way to manage your money after your death.
More and more Americans are taking advantage of revocable and irrevocable trusts. Depending on your situation, these are very powerful estate planning tools that help ensure your wishes after death. According to Experian, revocable trusts are good for avoiding probate, while irrevocable trusts can help avoid estate tax.
Avoiding probate with revocable trusts
A major concern for estate planners is probate. Depending on the situation, it is possible for assets to stay in probate for months, if not years. Careful planning is necessary to avoid this, and a revocable trust is a great way to avoid probate. Anything in a revocable trust goes straight to your beneficiaries.
Another benefit of revocable trusts is that you can make as many changes to the trust as you like before you die. The assets in a revocable trust remain your property.
Avoiding estate tax with irrevocable trusts
The government cannot apply estate tax to anything in an irrevocable trust. Another benefit is that creditors also may not go after anything in one.
However, you may not make any changes to an irrevocable trust after you create one. This is because anything in an irrevocable trust is no longer your property. It is also possible for the government to criminally charge you, if they find you created an irrevocable trust for fraudulent purposes.
While estate planning, you have many choices to make. Revocable and irrevocable trusts are great ways to ensure that you manage your assets exactly how you like.
