Trusts are one component of an estate plan that can greatly help or harm the plan. It is imperative that you carefully consider the goals that you have for the assets that you put into the trusts. This can help you decide what types of trusts you should establish.
One of the first decisions you have to make is whether you need a revocable or an irrevocable trust. These have very different purposes and various types of trusts fall within each category.
A revocable trust is one that you retain control over. You can choose to change the terms or cancel the trust completely. Because of this, it doesn’t have many of the protections of an irrevocable trust. This leaves the assets open to claims by creditors if you have any when you’re still living or after you pass away.
An irrevocable trust is one that you give up control over. Once it is established, you can’t dissolve it or change the terms. This type of trust provides some benefits, including protection from creditors. This means that if you owe money, bill collectors couldn’t try to get the assets in the trust because you technically don’t own them once the trust is established. There are also tax benefits to these types of trusts.
Trusts are only one component of your estate plan, so be sure that you have everything else in order. This can help to protect your loved ones and provide for them after you pass away. Just be sure that you think carefully about the trusts you establish reflect your wishes.