Trusts are legal arrangements that allow individuals to transfer assets to another person or entity for the benefit of a third party.
There are two main types of trusts: revocable and irrevocable. Here are some of the key differences between the two:
Revocable trusts
A revocable trust is a type of trust that a grantor can revoke or modify at any time during their lifetime. This means that the grantor can change the terms of the trust or even dissolve it altogether if they choose to do so.
Revocable trusts are often used as a way to avoid probate and ensure that the trustee distributes their assets according to the grantor’s wishes. They are also useful tools for estate planning, as they can help individuals maintain control over their assets while still providing for their loved ones.
Irrevocable trusts
An irrevocable trust, on the other hand, is a type of trust that a grantor cannot modify or revoke once they have created it. This means that the grantor relinquishes control over the assets placed in the trust.
Irrevocable trusts are often used as a way to protect assets from creditors, minimize estate taxes or provide for long-term care expenses. Because the grantor no longer has control over the assets in the trust, they are generally not subject to estate taxes or probate.
Key differences
The main difference between revocable and irrevocable trusts is the degree of control that the grantor maintains over the assets placed in the trust. Revocable trusts allow the grantor to modify or revoke the trust at any time, while irrevocable trusts require the grantor to relinquish control over the assets placed in the trust.
Choosing between a revocable and irrevocable trust depends on your specific needs and goals. With the right planning and guidance, trusts can be a useful tool for protecting assets and providing for loved ones.