Creating an estate plan allows you to provide your loved ones with instructions about how to handle your assets after you pass away. This is done by writing out a will, but it can also be accomplished by setting up trusts.
When you look into trusts, you’ll notice that each type of trust is classified as either revocable or irrevocable. It’s important to understand the distinction between these two. The biggest difference is that you can change a revocable trust because you retain control of the assets, but you can’t change an irrevocable trust because you relinquish control of the assets to the trustee who oversees the trust.
What are the benefits of an irrevocable trust?
One of the main benefits of an irrevocable trust is that the assets you place into the trust don’t count against the value of your estate. This can mean that your estate taxes are reduced since the value of the estate isn’t as high as it would be with those assets included.
Another benefit of an irrevocable trust that’s possible only because you don’t have control of the assets is protection from creditors. If you’re sued or have balances owed on credit accounts, creditors can’t try to claim the funds in the irrevocable trust.
These trusts also provide private transfer of assets to your loved ones since they don’t go through the publicly recorded probate process. Because this is only one tool that can help you achieve your estate planning goals, you should work with someone familiar with these matters who can help you get everything set up in a way that makes it easier for your loved ones to handle your affairs after your death.