It is highly likely that you will be at least somewhat familiar with the purpose of a last will and testament, even if you do not yet have one in place. Living trusts, however, are lesser-known, but they can also play a crucial role in an estate plan.
Living trusts present several advantages that may not be found in wills. Most notably, the use of living trusts could help your heirs avoid probate and even unnecessary estate taxes. Outlined below are the two major types of living trusts: Revocable and irrevocable.
Revocable trusts
The revocable trust is the more flexible of the pair. A revocable trust can be altered as many times as desired before death. Furthermore, all property that you place within the trust remains your personal property until death.
Upon your death, it will be up to your designated trustee to distribute assets according to your wishes. Once they have completed their duty, the trust then ceases to exist. Anything within a revocable trust need not go through probate. Therefore, your heirs may be able to skip months or even years spent in probate.
Irrevocable trusts
Irrevocable trusts are set. This means that anything you place within them and sign off on cannot be revised. The property placed inside instantaneously becomes the legal property of the trust, and you no longer have control over them.
One possible benefit of this type of trust is that the state will be unable to apply taxes to anything inside of it. Furthermore, creditors will not be able to pursue assets within an irrevocable trust because the property it contains is no longer legally yours.
Knowing the law relating to living trusts is in your best interests. Understanding the law relating to estate planning can help to protect your legal rights as well as the future of your heirs.