Estate planning is a critical task for all adults to complete. This outlines several points, including who receives which assets when you pass away. Trusts are one of the options you have to pass down assets.
There are two broad categories of trusts: revocable and irrevocable. Many people prefer the flexibility of revocable trusts over the inflexibility of irrevocable trusts. Understanding some points about revocable trusts may be beneficial to individuals setting up their estate plan.
What are the benefits of a revocable trust?
A revocable trust makes it easy to pass down assets to your loved ones. Because you retain control of the assets, you have the freedom to add or remove beneficiaries, change the terms of the trust or do away with the trust as you see fit. These trusts aren’t part of the court record of probate, so your beneficiaries will have privacy regarding what they receive from you.
What are the limitations of a revocable trust?
Because you retain control of the revocable trust, there isn’t protection from creditors for the contents of the trust. This means that bill collectors and even someone who successfully sues you can come after the assets in the trusts for payment. There are also limits to what types of assets you should put in this trust while you’re living. For example, certain retirement accounts shouldn’t be put in the trust until you pass away or you risk the contents of the retirement account being taxed.
Getting a comprehensive estate plan in place is critical. For all adults who need to get this done, working with someone who understands their wishes and the options for making them a reality is critical. The sooner this is done, the sooner the creator can have peace of mind.
