A trust is a legal document that ensures your assets are put to good use after your passing. Unlike a will, a trust bypasses the probate period and can avoid estate taxes. Likewise, a trust ensures your beneficiaries their allotment of your estate and privatizes any financial dealings.
You’ll have to consider what kind of trust you want. More popularly chosen, you’ll likely consider either a revocable or irrevocable trust. However, revocable and irrevocable trusts aren’t perfect by any means, despite their versatility. Here’s what you should know:
Pros: The main benefit of a revocable trust is that it can be altered and voided during your life. This means that if you and the beneficiary have a falling out, then you can revoke the trust. Additionally, if you feel that your beneficiary should be given more of your assets, then you can amend your current trust.
Cons: Assets in a revocable trust may be vulnerable to creditors. This is because a revocable trust doesn’t come into effect until after the grantor’s passing.
Pros: An irrevocable trust can’t be altered after its creation and, unlike a revocable trust, assets placed into an irrevocable trust are protected from creditors. An irrevocable trust may even detail how and when a beneficiary inherits their assets.
Cons: Yet, despite an irrevocable trust having protection against creditors, it can’t be altered after its creation, which is often considered the biggest downside. This means that no one, even the grantor, can alter the agreement made in the trust. Another disadvantage of an irrevocable trust is that it can be a lot more expensive to make than most trusts.
If you’re still unsure what kind of trust you want in your estate plan, then you may need to reach out for legal help to ensure you’re making the right choice.