Creating an estate plan gives you the power to dictate who is going to get which of your assets. While many people assume this is best done in the will, there’s another tool that you may choose to make it happen. This is the trust.
Trusts provide you with a considerable amount of control over the distribution of your assets. There are also benefits that come with specific trusts, so you should ensure that you understand those if you’re considering adding a trust to your estate plan.
Revocable and irrevocable options
There are two primary options for trusts – revocable and irrevocable. A revocable trust is one that you retain control over and can change as you desire. An irrevocable trust is under the control of a trustee, so you don’t keep any control over the assets. This means that you can’t change any terms unless the beneficiaries or court approve of the changes.
Under each of these categories, there are trusts that come with specific purposes. For example, a special needs trust is an irrevocable trust that enables you to provide care for someone who relies on needs-based services like Medicaid.
Benefits of a trust
Trusts can provide privacy for the beneficiaries because they aren’t recorded in probate court. This means that the details of their inheritance won’t be public record.
Irrevocable trusts have some benefits that aren’t present for revocable trusts. One of these is that the assets in the irrevocable trust aren’t counted as part of your estate plan, so there may be tax benefits. These trusts can also protect the assets from your creditors since you don’t have control over the assets.
Trusts are only one component of a comprehensive estate plan. It’s critical to ensure you have all the necessary components for a comprehensive plan so you can rest assured that your loved ones will be taken care of in the best way you can.