One of the fundamental duties of an estate plan is getting a person’s assets to their beneficiaries after they pass away in the way that they intended. This can be done through the will, but trusts are often used to make the asset transfer process more streamlined.
A trust can bypass the probate process, which may enable the beneficiaries to receive their inheritance in a quicker and more private manner. Understanding how trusts interact with the rest of your estate plan is critical.
Two categories of trusts
Trusts are categorized as either revocable or irrevocable. A revocable trust is one that can be changed or canceled when you feel it’s necessary. An irrevocable trust can’t be changed unless the court or the beneficiaries agree to the changes.
Some people prefer revocable trusts because of the flexibility they offer. However, it’s important to note that they don’t offer the same protections as an irrevocable trust. When you establish and fund a revocable trust, the assets in the trust remain under your control. When you establish and fund an irrevocable trust, the assets shift to the control of the trustee.
Since you don’t have control over the assets in an irrevocable trust, they can’t be claimed by your creditors or to satisfy judgments against you. Additionally, the value of the assets held by the trust aren’t counted as part of your estate plan. Both of these points can be important wealth preservation strategies that allow you to get as much of your estate to the beneficiaries as possible.
It’s important that trusts are created properly. Having experienced estate planning guidance can help you ensure that you’re setting up the best trust for your interests and that it’s done in the correct manner.
