Trusts play a key role in managing and distributing assets, offering two main options: revocable and irrevocable trusts.
Understanding the benefits of each and the factors to consider can aid you in making informed decisions about estate planning.
Revocable trusts
Revocable trusts grant flexibility and control to the grantor, the person creating the trust. During the grantor’s lifetime, they can alter or terminate the trust. This gives them the ability to modify beneficiaries, assets or terms as circumstances evolve.
Revocable trusts can be a suitable choice for those seeking to retain control over their assets and make changes as needed. This type of trust also helps ensure privacy unlike wills, which are subject to public probate court proceedings. Additionally, assets in a revocable trust bypass the probate process, reducing potential delays and costs.
Irrevocable trusts
Irrevocable trusts, in contrast, offer distinct advantages centered around asset protection and potential tax benefits. Once established, the grantor cannot make changes without beneficiary consent.
This type of trust shields assets from creditors and can have tax advantages, particularly in terms of estate taxes. It also enables the grantor to gift assets while retaining some level of control or influence over their distribution. Irrevocable trusts are often used to manage wealth for future generations.
When you are ready to join the 34% of Americans with an estate plan, including a trust provides many benefits. Weigh the differences carefully between revocable and irrevocable trusts to ensure your choice aligns with your financial and estate planning needs.
