Trusts are a useful and common form of estate planning, and they come in multiple forms. How do you know which one is right for you?
Consider the differences between revocable and irrevocable trust.
Definition of a trust
A trust is a legal document similar to a will that explains how you intend to distribute your assets when you pass away. It can also include arrangements for your funeral and who will make medical decisions for you.
You can include a will and a trust in your estate plan. However, many people opt for a trust over a will because it allows your family to avoid probate. Additionally, a trust permits you to name a trustee who will oversee the distribution of your property and carry out your wishes once you are gone.
Revocable vs. irrevocable trust
The primary difference between a revocable and an irrevocable trust is in the name. A revocable trust is more flexible. You can change the terms or revoke the trust at any time because it does not become irrevocable until you die.
An irrevocable trust takes ownership of your assets, and you can no longer make changes without permission from the court or a beneficiary.
Choosing the right trust
A revocable trust is often the most appealing choice because it allows for more flexibility. However, a common reason to choose an irrevocable trust is to avoid estate taxes.
Deciding between a revocable and an irrevocable trust is a question of how certain you are about the decisions you made for your estate.