No matter how much money or how many assets you have accumulated during your lifetime, creating a trust could be a good way to ensure your loved ones are taken care of when you die, explains a trust lawyer from a law firm like Kaplan Law Practice, LLC. Trusts, however, come in several different forms, each with its own strengths and weaknesses. Consider a bit of insider information that may help clarify how distinct trusts work and which is right for you.
Living Trusts vs. Testamentary Trusts
All trusts can be categorized as either living or testamentary. Living trusts, also known as inter vivos trusts, come into play while you, the owner of the estate, are still alive. Typically, you would name yourself or another trusted person to fulfill the roles of the trustee and the beneficiary. Living trusts are often still under the control of the grantor, therefore, and can be altered at any point during your lifetime.
One of the biggest perks of living trusts is that, when funded, they allow your estate to change hands without having to go through probate. This may save your family both money and time. Additionally, because you would name backup trustees and beneficiaries, someone you can depend on is always able to step in and make decisions when you are unable to do so.
A testamentary trust, on the other hand, is set up in your will and only comes into effect after your death. This type of trust can be a good way to manage money if your beneficiary is a minor. Importantly, testamentary trusts do not allow you to skip the probate process.
Revocable Trusts vs. Irrevocable Trusts
When considering living trusts, it is essential to differentiate between revocable and irrevocable options. A revocable trust gives you a great deal of flexibility because you can change the trustee, beneficiaries, and other terms whenever you wish. This way, you always have a plan for the management of your estate but have the ability to adjust this plan as circumstances change. When you die, the revocable trust becomes irrevocable.
Irrevocable trusts are essentially inalterable. Once you create one, there is no going back or changing the terms. Though this finality comes along with certain concerns, irrevocable trusts can be advantageous in terms of reducing federal estate taxes.
How To Form a Trust
If you think a trust may be a good option for your estate plan, be sure to contact a living trust lawyer right away. These legal professionals can make sure your trust is set up properly and that it suits your estate’s and your family’s needs.