Many people turn to trusts during the estate planning process because they provide benefits that a simple will may not. By placing assets in a trust, those assets will avoid probate. This provides you with greater privacy and allowing your loved ones to receive their inheritance without the time-consuming probate process. It also allows you to include more detailed instructions for how and when your loved ones will receive their inheritance.
However, your relationships and your wishes for your estate may change over time. When your life changes, can your trust change along with it? The answer depends on the type of trust you establish.
Irrevocable trusts cannot be altered.
Irrevocable trusts, as the name implies, cannot be revoked or changed after they are completed. Any property placed in trust belongs to the trust rather than its original owner. While this limits the flexibility of the trust, it also means that the assets placed in an irrevocable trust will not be subject to estate taxes after you pass away because they are not your property. If you struggle with debt in the future, an irrevocable trust may also protect those assets from creditors.
Revocable trusts offer greater flexibility.
Revocable trusts provide their creators with greater flexibility because they can be revoked or changed at any time during your life without the approval of the beneficiaries. You can transfer assets to the trust and back again as needed and benefit directly from the assets in the trust.
Choosing the right type of trust for your estate plan — whether revocable or irrevocable — can help you achieve your goals and provide for your loved ones for years to come.