When people think about estate planning, they often think first of a will. However, a will doesn’t keep you out of probate and it doesn’t necessarily protect your assets. Trusts are much more versatile tools for both, and there are a number of different trusts to choose from depending on your specific situation. The most common ones referred to are revocable and irrevocable trusts. Below, you’ll find an explanation of each option and the factors to consider when deciding which is right for you.
Step 1: Revocable Trust – The “Flexible” OptionThe Immediate Response
A revocable trust, often referred to as a “living trust,” can be considered a holding area for assets that you can manage while you are still alive. As the grantor, you stay in control of the assets. You can move assets into or out of the trust, update the terms as your needs change, or fully revoke the trust if necessary.
- Best for: High-net-worth individuals or anyone desiring to protect their assets from creditors or wanting to minimize estate taxes by subtracting them from their taxable estate.
- Trade-off: You lose any ability to access or control the assets once they are placed in the trust. However, many people find this trade-off worthwhile in exchange for significant tax benefits and legal protection.
Which Should You Choose?
With the help of your litigation counsel, it’s a good idea to explore all available structured pathways to resolution.
- Choose a Revocable Trust if: Your ultimate goal is to provide your heirs with a seamless transition of assets and to avoid the public, lengthy process of probate.
- Choose an Irrevocable Trust if: Your focus is on complex tax planning, protecting your wealth from potential future creditors, or long-term care planning.