Even if you do not currently have a last will and testament, it is likely that you are familiar with the purpose of the document. Many people, however, are less aware of living trusts and the role that they can play in a robust estate plan.
Living trusts have a number of advantages that wills do not have. For instance, proper use of living trusts can help your heirs avoid probate and even estate taxes in some instances. According to Experian, the two major types of living trusts are revocable and irrevocable.
Revocable trusts
This is the more flexible variety of living trust. You can change a revocable living trust as often as you like before you die. Anything that you place inside of the trust remains your personal property until death.
Once you die, your appointed trustee will then distribute the assets inside of the trust according to your wishes. Once the trustee does this, the trust stops existing. The major benefit of a revocable trust is that anything inside of one does not go through probate. This means that your heirs will be able to skip weeks, months or even years in probate.
Irrevocable Trusts
Once you create an irrevocable trust and sign off on it, you can make no further changes to it until death. Anything that you put inside of an irrevocable trust becomes the legal property of the trust the moment you place it inside.
The major benefit of irrevocable trusts is that they prevent the government from applying estate taxes to anything inside of it. An irrevocable trust can also protect your assets from creditors, as anything inside of an irrevocable trust is not your legal property.