Determining the most effective manner for getting assets to loved ones after you die is one of the critical decisions that you must make when you’re handling estate planning. Some people are able to do this through a will, but there are times when that’s not the best option.
Trusts are another option that can be used to ensure beneficiaries receive the assets they should. These are classified as either revocable or irrevocable. Both types provide a way to get beneficiaries their inheritance without having to go through probate, which offers privacy and convenience. But, there are a few significant differences between them that you should know.
1. Permanency
One of the primary differences between these trusts is that revocable trusts can be changed when you want, but irrevocable trusts can’t be changed without approval. If you want to change an irrevocable trust, you have to get permission from the court or from every beneficiary named in it.
2. Control of assets
You can retain control of the assets you place in an irrevocable trust. You must hand over control of the assets in an irrevocable trust to a trustee.
3. Creditor access
Since you control the assets in a revocable trust, your creditors can seek to seize those assets to satisfy judgments. They can’t seize assets in an irrevocable trust because you aren’t the legal owner of the assets and the trustee has control over them.
Ensuring the trust is established and funded properly is critical. Working with someone who can provide you with guidance in this matter is often beneficial.