Determining the best type of trust for your unique situation can be challenging if you do not understand all of your options. Different kinds of trusts serve different purposes and are appropriate under different circumstances. However, living trusts are a common kind of trust that people in a variety of situations can benefit from.
A living trust is a kind of trust that you make during your lifetime. It can help you manage your assets during your lifetime and ensure your assets are distributed the way you want after you pass away. Living trusts can be either revocable or irrevocable, which can cause confusion for some who do not know how the two types of living trusts differ.
Revocable living trusts are a popular choice
Revocable living trusts are a popular choice because they allow you to change or terminate the trust whenever you feel it is appropriate to do so. Another benefit to a revocable living trust is that you can name yourself as the trustee and manage for yourself the assets you put in the trust.
You can also name a successor trustee to manage the assets if you become unable to do so. This person can also distribute your assets to your beneficiaries after you pass away.
Irrevocable trusts offer additional protections
Irrevocable living trusts cannot be changed after being created. Also, you cannot serve as the trustee, which means you must select someone else to manage the assets you put in the trust.
In most circumstances you will probably want a revocable trust over an irrevocable trust because it is a more flexible type of trust that allows you to continue controlling your assets. However, irrevocable trusts offer better protections in certain circumstances.
For example, the assets you put in an irrevocable trust are protected from creditors and from being taken in a lawsuit. Also, those assets are not taxed as part of your estate and cannot disqualify you for certain governmental benefits.
There are many types of trusts to choose from as you begin creating your estate plan. Understanding the various options, such as revocable and irrevocable living trusts, can help you determine which type of trust is best for your situation.