A trust is a legal arrangement where you give another party, known as the trustee, authority to manage your assets on behalf of a beneficiary or beneficiaries. There are several types of trusts to choose from, but a major difference is whether they are revocable or irrevocable.
It all boils down to your level of control over the trust assets and whether you can change its terms when you wish.
You can modify a revocable trust at any time
Unlike an irrevocable trust, where ownership is permanently transferred to the trust, and it’s nearly impossible to change the terms, a revocable trust offers more flexibility. You still own and control the assets held in the trust, and you can do as you please, including removing them from the trust and modifying its provisions.
However, once you die, the revocable trust automatically becomes irrevocable. Afterward, the trust will be managed according to the conditions you set when creating it.
What are the benefits of a revocable trust?
Trusts will help you avoid the probate process, which can be costly and time-consuming. They also preserve your privacy and, in some cases, minimize estate taxes.
However, you may not want a trust where you have no control over your assets, at least in your lifetime. That is where revocable trusts come in since you can carefully plan for the future while making the necessary adjustments.
Choosing the right kind of trust
A revocable trust may work for you, or not. Making the best choice can be confusing, given the many variables that could be present.
- What do you seek to achieve with the trust?
- Do you have a loved one with special needs?
- How far in the future are you looking?
These are some of the considerations that will help you make the right decision, ensuring you achieve your estate planning objectives.