You know that you should at least have a will, just to prepare for what will come eventually. A will is a good place to start with any estate plan, but sometimes it just isn't enough. This is where trusts enter the picture. A trust may give you all the protections you desire, but what kind do you need?
There are several types of trusts out there and available to Texas residents. Two of the most commonly utilized are revocable and irrevocable trusts. What is the difference between the two?
You may have heard of this type of trust before as either a revocable or living trust. It is a kind of trust that you have the ability to change at any time after its creation. This you would do through a trust amendment. It is also possible to revoke the trust entirely if you do not want it anymore for any reason.
With this type of trust, you would place your assets in the trust, but they would still technically belong to you. This can cause issues down the line with creditors, estate taxes and Medicaid planning. It certainly has its pros and cons.
An irrevocable trust cannot be modified or revoked — except under very special circumstances. For most people, once it is created and put in place, that's it. Assets that get placed in this type of trust now belong to the trust. This can prove helpful when it comes to reducing estate taxes, Medicaid planning and fighting off creditors.
There are many different types of irrevocable trusts. Some of them include:
- Irrevocable life insurance trusts
- AB trusts
- Charitable lead trusts
An experienced estate planning attorney can review your assets and discuss your goals with you so that you can find the right trust for your needs. Both kinds of trusts serve valuable purposes. Both protect assets, though, they go about it in different ways.
At the end of the day, having a revocable or irrevocable trust can reduce the odds that your estate will be subject to the probate process — meaning your beneficiaries will have fewer hoops to jump through to access what you leave to them. Now, not everyone needs a trust. Sometimes wills are sufficient. If you are not sure if a trust would better serve you and your loved ones, it is certainly worth looking into.