All adults should have an estate plan in place, but that doesn’t mean that this is something that’s easy to do. One of the most difficult things for some people to do is to determine who is going to get which assets.
If you’re creating your estate plan, determining what to do with your assets is only the first step in what you need to take care of. Once you know that information, you’ll have to decide the best option to get those assets to the intended beneficiaries.
You have the option of using your will, but this isn’t always the best choice. Trusts are another possibility, but you’ll have to decide if you want the trust to be revocable, meaning it can be changed, or irrevocable, meaning it can’t be changed.
What is the tradeoff for the permanency of an irrevocable trust?
Some people find out that they can’t change an irrevocable trust and wonder why anyone would want to use that type. When you create an irrevocable trust and fund it, those assets are transferred to the control of the trustee.
Since you don’t have control over those assets, they’re protected from your creditors. This is often beneficial for wealth preservation, particularly for people who have a high likelihood of facing lawsuits or high debts because of their professional or personal activities.
Another benefit is that assets placed in an irrevocable trust are removed from your estate. This can reduce the overall value of your estate, which can also reduce estate taxes, particularly in higher-value estates.
Creating a trust can also provide your loved ones with privacy after you pass away. Trusts bypass the probate process, which means the terms aren’t entered into the public record. In order to gain this protection, you must ensure that the trust is set up properly, which likely requires you to work with someone familiar with irrevocable trusts.
