As you move into the latter stages of life, you want to know where your resources will end up when you pass away.
Setting up a trust is an extremely common way to do this, and it can help ensure that your life’s savings will end up in the right hands.
Here are a couple of types of trusts you should know about, revocable and irrevocable trusts.
A revocable trust is one that is changeable after it is made. Being able to change a provision or two in your trust might be a good option if you have any serious relational issues with your beneficiaries.
Additionally, you can decide to entirely rework the trust if you find that its provisions are not the way you would like them to be later in life. A large positive for people who choose a revocable trust is that you can adjust if your mental health suffers in old age.
This is a concern for many people. If you have a specific illness already, or your family has a history of mental decline in old age, you may want to consider a revocable trust. That way, you can pass your assets on to a trusted beneficiary when the time comes.
Finally, revocable trusts do not require probate. Probate is essentially the process of bringing your beneficiaries to court and verifying the dispersion of your estate. If you would rather not put your beneficiaries through those legal proceedings, a revocable trust will not force you to.
An irrevocable trust is one that is not changeable after it is made. So, once the grantor has finalized the paperwork, you cannot change it.
That means forever, so make sure to choose wisely. There are a few ways that people use irrevocable trusts in order to benefit themselves in other ways.
One of those ways is an estate tax reduction. Removing the value of your property from your estate by issuing an irrevocable trust can help your beneficiaries avoid paying taxes on property when you pass.
Additionally, placing assets into an irrevocable trust essentially sets them aside from the hands of creditors and the like. In this way, your assets are still passed down to your family when you pass and they are not liable to be used in any way other than is listed in the trust.
This is because, in a sense, one gives up ownership of assets when they place them into a trust. Those assets are held unconditionally until the grantor passes, at which time those assets will be granted to the beneficiary.
Want to Learn More about Revocable vs Irrevocable Trusts?
Understanding revocable vs irrevocable trusts is essential if you plan to use one of them in securing your assets. There is a lot more to learn that is not listed in this article, though.
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