The majority of people are at least familiar with the role of a will in distributing a deceased person’s assets, but many people are far more hazy about living trusts. In fact, a comprehensive estate plan usually involves both a will and a living trust.
Living trusts provide advantages that wills do not have. According to Experian, two kinds of living trusts exist: irrevocable and revocable.
What is an irrevocable living trust?
Once you sign the paperwork on an irrevocable living trust and put assets into that trust, you cannot make any further changes. Everything that you put inside of the living trust also becomes the immediate property of the trust, and no longer your property.
Many people choose a revocable living trust if they want to ensure that they protect their assets from creditors. Since the assets in the trust are the property of the trust and not your property anymore, those assets are off-limits to creditors. Additionally, the government may not apply estate taxes to anything that is in the trust.
What is a revocable living trust?
With a revocable living trust, any assets that you put into the trust remain your personal property. You can also make as many changes as you like to a revocable living trust so long as you are alive. Once you die, your named successor will distribute the assets in the trust as per your wishes.
The main advantage of a revocable living trust is that anything that is in the trust will not go through probate. The government will still tax the assets in the trust, but the assets will get to your heirs much faster.