If you have worked hard your entire life and made wealth, it only makes sense to figure out how to protect it. One of the most effective estate planning tools you can use to protect your legacy and loved ones’ future is a trust. Besides reducing the value of your estate, potentially eliminating probate and making it easier to pass down assets to your heirs, a trust can also shield your estate from creditors
However, each type of trust comes with its merits and demerits, so it is important that invest time in understanding how different trusts operate. Broadly speaking, trusts fall into two broad categories: revocable and irrevocable trusts. Here’s what you need to know:
Revocable trusts
This type of trust gives you control over your assets whilst you are alive. You can change or even dissolve the trust if you want – hence the name “revocable.” For instance, if your assets change or if you go through a significant life event like a divorce, you can update the terms of the trust to reflect these new changes.
If you are looking for flexibility, then you are better off opting for a revocable trust. However, do keep in mind that a revocable trust is not shielded from creditor claims.
Irrevocable trusts
Unlike a revocable trust, an irrevocable trust cannot be changed or modified once established. This means that once you transfer assets to the irrevocable trust, you cannot undo your action. One of the greatest benefits of setting up an irrevocable trust is that it can protect your assets from creditors. It can also eliminate certain estate taxes. This can be appealing when you have a large estate.
A trust is one of the most important estate planning tools you can ever create. Find out how you can protect your rights and interests while establishing a trust for your estate.