Creating your estate plan gives you a chance to dictate what happens to your assets when you pass away. People can pass along assets through their will, but many opt to establish trusts for doing this for a variety of reasons.
When you look into trusts, you’ll notice that every type of trust is either revocable or irrevocable. Revocable trusts can be changed if you want to. An irrevocable trust can’t be changed once it’s established unless all the beneficiaries agree.
What’s the difference between these classifications?
One of the most important differences between them is that an irrevocable trust offers protection from creditors, but an revocable trust doesn’t. If you establish an irrevocable trust, your heirs will receive what’s due to them without creditors being able to stake a claim to the contents of the trust. This is because you don’t control those assets once the trust is established and funded.
Another difference between the two types of trusts has to do with taxes. Because you retain control of the revocable trust, it’s subject to taxes. The irrevocable trust isn’t subject to the estate tax when you die. You just have to be sure that it’s established in the appropriate manner.
Sometimes people favor passing along assets via a trust because it keeps the terms private. This can protect the beneficiaries since it won’t be made public. It’s imperative that you ensure that the trust is set up in the manner you intend. This can help you ensure that your loved ones will get what you intend for them to have.