Creating an estate plan is an important event for any adult. This is the opportunity to leave instructions for how their assets will be handled down to beneficiaries. While most people know that they should have a will, some people don’t realize that trusts can also play an important role in the estate planning process.
Trusts are categorized as either revocable or irrevocable. These terms are based on what the trust creator can do with the trust after it’s created and funded. A revocable trust can be changed or canceled as the creator sees fit. An irrevocable trust can’t be changed unless the beneficiaries or court approves of the changes.
Benefits and drawbacks of both types of trusts
The creator of the trust retains control over the assets in a revocable trust, but a trustee takes over control of the assets in an irrevocable trust. Because the creator retains control over the assets in the revocable trust, those assets aren’t shielded from creditor claims.
Since the assets are controlled by the trustee in an irrevocable trust, those assets are shielded from creditor claims against the creator. This means that creditors can’t touch those assets even if the decedent owes them money.
Trusts make it easier to get assets to beneficiaries upon the decedent’s death. Assets that are held in trusts bypass the probate process, which minimizes the time and money it takes to get the assets to their new owners.
Working with someone familiar with the estate planning process can help to ensure the plan accurately reflects the creator’s wishes. This should be a comprehensive plan, so it will include more than just trusts.