If you’ve spent any time at all researching estate planning, you have come across the concept of trusts. Trusts are one of the cornerstones of modern estate planning, and there are many kinds of trust that may be used depending on your circumstances and the goals you hope to achieve.
However, trusts are not a simple matter to establish and maintain, and actually benefitting from them requires a thorough plan and foresight. If you plan to place your assets into a trust while you are still living, you will broadly choose between either a revocable or irrevocable trust.
In general, a revocable trust grants you more control over the assets within the trust and terms of the trust itself, but this control is maintained at the expense of a number of benefits that less wieldy irrevocable trusts offer. In general, a revocable trust offers very little or no protection from creditors. Rather, a revocable trust is often used as legal structure in which to hold assets if your estate becomes too large to manage easily, or to clearly direct your affairs if you become incapacitated.
Contrastingly, an irrevocable trust offers some tax protections and may shield your assets from creditors, especially if you are a businessperson with professional liabilities that could threaten you personal assets. Irrevocable trusts can offer significant protections, but must be planned out well in advance. Once you place assets in a trust and establish its terms, altering it ranges from difficult to legally impossible.
If you believe that some form of living trust is right for you, it is wise to consult with an experienced attorney who can help you understand the nuances of each option’s advantages for your situation. With proper legal guidance, you can confidently use a trust to achieve your goals, while protecting your rights.
Source: U.S. Citizenship and Immigration Services, “How to Choose Between a Revocable and Irrevocable Trust,” Joanne Cleaver, accessed Feb. 24, 2017