Estate planning can be overwhelming due to the many options. Most Americans are familiar with the function of a will. However, far fewer know how powerful living trusts can be when it comes to estate planning.
Living trusts are very similar to wills in some ways but offer different advantages. According to Experian, there are revocable and irrevocable trusts.
Revocable trusts
This is the most flexible variety of living trust. Revocable trusts allow you to make as many changes to the trust as you would like, provided you are still alive. Anything that you put into a revocable living trust remains your property.
The biggest advantage to a revocable living trust is that anything that is in the trust will bypass probate. This means your beneficiaries will get what you bequeath to them faster. Given that probate can take months or years, revocable living trusts are a powerful and popular estate planning tool.
Irrevocable trusts
This type of trust is far less flexible than the revocable trust. Anything that you put into an irrevocable trust is no longer your personal property; rather, it is the property of the trust. You cannot make any changes to an irrevocable living trust once you create it.
However, the government may not apply estate tax to anything in an irrevocable living trust. Likewise, creditors cannot go after these assets, since they no longer belong to you.
Understanding all of your options when estate planning is challenging. However, guided use of living trusts can ensure that your assets go where you want them, when you want them to.