When preparing an estate plan, some people might not know that they have options other than writing a last will and testament. Creating a revocable or irrevocable trust could be the appropriate decision. Researching the purposes and potential upsides of trusts is advisable.
An estate trust
When creating a trust, the grantor establishes a legal entity administered by a trustee on behalf of one or more beneficiaries. The grantor often chooses to create a trust to avoid probate, as some assets may pass without the need to go through the legal process. Others might have concerns about taxes, and a trust may reduce the obligations that might come into play when probating a will.
Also, a grantor could maintain more control over the assets when creating a trust. The grantor might not want to turn over a lump sum amount of money to a particular beneficiary, and the trust could stipulate the person receives 10% of the amount each year for ten years. That’s one example of how the grantor could exercise control after their passing.
When wondering about establishing a trust, people should review the differences between a revocable and an irrevocable trust. With a revocable trust, the grantor can alter, change or revise the trust at will. If the grantor wants to add or remove assets, they can do so.
With an irrevocable trust, the grantor cannot make changes so easily. Changing an irrevocable trust requires the grantor and beneficiary’s approval, but final approval from the court might be necessary.
A trust could be preferable to some people who are wondering how to distribute their assets. However, they should look at the pros and cons of using a trust and decide whether a revocable or irrevocable one is better.