People who are setting up an estate plan have a lot to consider. These plans need to detail end-of-life care plans, and they also need to provide instructions for how to handle assets after the creator passes away.
If you’re creating an estate plan, you should determine the most efficient manner for passing assets to your beneficiaries. It’s possible to do this through a will, but some people opt to use trusts either instead of, or in addition to, will-based strategies.
What is the purpose of a trust?
A trust is a legal tool that holds assets until you pass away. The contents of a trust are then handled according to the instruction you put into place when you establish the trust. There are many different kinds of trusts that serve different purposes. For example, a charitable trust lets you support a favorite cause and a special needs trust helps to provide for a beneficiary who relies on needs-based assistance.
Trusts bypass the probate process, they offer more privacy than what’s possible if your assets are passed down using a will. Since the beneficiaries don’t have to wait on probate, they may reap the benefits of the trust sooner.
What do revocable and irrevocable trusts do?
Trusts are classified as either revocable or irrevocable. A revocable trust is one that you can change or even cancel as needed. That’s not the case with an irrevocable trust, which can only be changed or cancelled if the beneficiaries agree or the court issues an order.
You retain control over the assets in a revocable trust, so these trusts don’t provide asset protection if you’re sued or have to pay a court awarded settlement. Since a trustee has control over an irrevocable trust, the contents of those trusts are shielded from lawsuits, creditor claims or court awards.
Creating a comprehensive estate plan is the only way that a person can ensure their wishes are followed after they die. Working with a legal professional who can assist with determining the best way to relay instructions is critical. Getting this done sooner is beneficial, since you never know what may happen.