As people create their estate plans, they may have the option to create a trust. A trust is a legal document that can help protect the management and distribution of assets. A trust can sound a lot like a will. However, unlike a will, a trust can protect an estate from disputes, estate taxes and probate.
With the right trust, an individual can have more control and protection over their estate after they pass away. There are two popular trusts: revocable and irrevocable trusts. Here is what you should know:
What is a revocable and irrevocable trust?
A revocable trust allows the grantor to add assets to a trust and designate how their assets are managed. The grantor can alter the revocable trust, allowing them to add or remove assets or beneficiaries or revoke the trust. Once the grantor passes away, the trust becomes irrevocable.
An irrevocable trust can not be altered as easily as a revocable trust. A grantor can make an irrevocable trust, however, they may need consent from beneficiaries to revoke or alter the contents of the trust.
Are there other kinds of trusts?
Grantors can make other kinds of trusts besides revocable and irrevocable trusts. Many trusts allow the grantor to make unique instructions. For example, a generation-skipping trust can skip one generation for the benefit of the next, which can protect assets from taxes. Or, a grantor may make an incentive trust that includes clauses to limit when a grantor can access funds.
Legal guidance can help individuals set up a trust for their estate plan.
