The majority of Americans know that they must create a will in order to ensure an orderly distribution of their estate. However, fewer Americans are aware of the role that living trusts can play to help ensure that their beneficiaries manage the estate properly and receive the most benefits.
Living trusts have many benefits that wills do not offer. According to Experian, two varieties of living trust exist: revocable and irrevocable.
The revocable trust
With this kind of trust, you can make as many modifications to it as you like while you are still alive. Additionally, any assets that you decide to put into a revocable living trust remain your legal property until death. Once you die, your named trustee will then distribute the assets in the trust to your desired beneficiaries.
The main benefit of a revocable trust is that anything in the trust will not go through probate. Since probate is an expensive and public process, the prospect of avoiding it means that many Americans make a revocable trust a cornerstone of their estate plan.
The irrevocable trust
With an irrevocable trust, you may not make any modifications to the trust once you sign the paperwork. Additionally, anything that you put into this trust becomes the legal property of the trust.
The major benefit of an irrevocable trust is that the government cannot subject anything that you put into an irrevocable trust to estate taxes. Plus, anything that is in an irrevocable trust is not accessible to creditors since the assets belong to the trust and not to you.
The type of trust that a person chooses to use depends on the situation. It is important to choose a trust that provides the results and benefits that a person is looking for.
