It is a common misconception that estate planning is specifically for those who are wealthy and have millions of dollars in the bank or in property worth. However, this is far from the truth. In fact, when it comes to estate planning the goal is to help organize a person’s assets and wishes after they pass on or in the event of incapacitation. So, you don’t have to be a millionaire to care about what happens to your legacy after you pass on. Many people establish a trust within an estate plan, so their loved ones can receive a cherished portion of their assets after death.
When people consult with a professional about writing an estate plan, they may ask what the difference is between an irrevocable and revocable living trust. Here, we have provided information that describes what each type of living trust entails:
Revocable Living Trust
Estate planning professionals tend to suggest their clients write a trust as a way to avoid their assets from going through probate after passing away. The most frequently used type of living trust is the revocable living trust. What this means is, a person wishes to transfer ownership of their assets to a trust (which in essence places these tangible and intangible items outside of probate).
But, in order to maintain control over these assets during that person’s life, he or she must assign their name as the trustee. Then after passing on, these assets skip the probate process entirely, and are automatically transferred to your designated beneficiaries.
A person’s personal and financial situation can go through major changes over the year. Because of this, it is important to remember to review the written terms of the trust every so often. They say that checking in on your living trust is a good idea every few years or as significant life events occur, such as a marriage, divorce, birth, or death in the family. It is key that the terms reflect your wishes based on the circumstances of your life now.
Irrevocable Living Trust
An irrevocable living trust offers strong protection over a person’s assets. However, once this form of living trust is written, the grantor is not in control of their assets any longer. Managing the assets then falls to the assigned trustee, who administers the trust for beneficiaries. Many clients may ask their estate planning professional about why anyone would choose to have an irrevocable living trust. Well, this strategy can help protect the grantor from predatory and sneaky claims, in addition to safeguarding the assets until the heirs receive them.
The terms within an irrevocable trust cannot be changed after it has been created. This also means that as life circumstances change, the grantor cannot make adjustments to the documents. It is crucial to meet with an estate planning professional to determine which type of living trust is going to be most both in yours and your beneficiaries favor.