Many people opt to use trusts as part of their estate plan. When you do this, you have to determine what type of trusts you are going to establish. There are many to choose from, but each one will be classified as either a revocable or irrevocable trust. Understanding the difference between these two designations can help you make the decisions you feel are best.
A revocable trust is one that you can change when you want to. You can switch to a different beneficiary or cancel the trust completely if you decide to. Some people appreciate the flexibility that this gives them since they can tweak the trust until they have it exactly how it needs to be. The downside to this is that there are some protections that this type of trust doesn’t provide that might be valuable for you.
An irrevocable trust is one that you can’t change once you establish it. The primary benefit that most people choose this type of trust for is that it provides protections from creditors. If you’re sued, the contents of the trust can’t be taken by the creditor as long as the trust has been funded. Because you can’t change things about this trust, you need to ensure that it is set up exactly how you want it.
There are many other considerations to think about when you’re trying to determine what type of trust you should establish. Ensure that you think about the purpose of the trust and how the various options available might impact your loved one when you pass away.