Most adult Americans are familiar with the concept of a will. However, many people have no idea of the benefits associated with living trusts. While a will can do many things, there are some limitations. For this reason, many estate planners elect to have both wills and living trusts as part of their plan.
There are two major varieties of living trust. Which one you choose depends on your particular estate planning needs. As per Experian, the two major varieties of living trusts are revocable and irrevocable.
What can a revocable trust do?
Revocable trusts are a good path to take if you want to ensure that important assets like your house do not get stuck in probate. If you pass down property using a will, that property will need to go through the probate process. Probate can be expensive and very time-consuming, particularly if somebody does decide to challenge your will.
If you put your property into a revocable trust, it will skip probate and go automatically to your heirs. Additionally, you can make as many changes as you wish to a revocable trust while you are still alive, and anything in a revocable trust remains your personal property until death.
What can an irrevocable trust do?
On the other hand, once you create an irrevocable trust you cannot make any changes to it. Irrevocable trusts are helpful if you would like parts of your estate to avoid estate tax. Once you put assets into an irrevocable trust, they become the property of the trust and no longer your personal property. This means that the government cannot subject anything in an irrevocable trust to estate taxes and creditors cannot go after those assets.