What are the two kinds of living trust?

On Behalf of | Jul 4, 2021 | blog, Estate Planning | 0 comments

The majority of adults are familiar with the function of a last will and testament. It is true that the majority of comprehensive estate plans contain a will. However, a last will and testament is not the only way for you to hand down your valuable assets to your family members and chosen organizations.

Living trusts are very powerful components of robust estate plans. There are two major categories of living trust: revocable and irrevocable.

The purpose of a revocable trust

Revocable trusts are quite similar to wills in some ways. For instance, anything that you put into a revocable living trust will remain your property until your death. You can also make as many changes as you like to the living trust until you die.

The major benefit of a revocable living trust is that it will provide a way for you to pass down assets without the assets inside the trust going through probate. Probate is an expensive and public process that can potentially take years, so avoiding it is often a major point of estate planning.

The purpose of an irrevocable trust

Once you create and fund an irrevocable trust, you cannot make any changes to it. Additionally, anything that you put inside of an irrevocable trust becomes the legal property of the trust, not you. The major benefit of an irrevocable trust is that the government will not subject anything that is inside an irrevocable trust to estate taxes.

Just as a last will and testament is a cornerstone of an estate plan, including living trusts is often a wise idea.