A person who has assets to pass down to their heirs and beneficiaries can sometimes do that in a will. However, many people opt to use trusts because they can bypass the probate system. The individual who creates the trust can set certain terms for the disbursement by the trustee.
One thing that some people don’t realize is that there is more than one type of trust. Every trust falls under one of two categories – irrevocable or revocable. These each have very different points that you need to consider.
How do irrevocable and revocable trusts differ?
One of the biggest differences between irrevocable and revocable trusts is that irrevocable trusts can’t be changed or canceled, but revocable trusts can. This means that once the creator of the irrevocable trust sets up the trust and terms, they typically can’t change it if circumstances change. While it is sometimes possible to modify an irrevocable trust, it is very difficult to do so.
Another difference is that a revocable trust isn’t protected from creditors, but the irrevocable one is. When you set up an irrevocable trust, creditors can’t make a claim against the trust so your loved ones will be able to receive the full benefits of the trust.
Discussing your plans with your estate planning attorney can help you learn what type of trust is best for your and your family’s needs. There are various types of irrevocable and revocable trusts that you might be able to use. Considering the purpose of the trust and the circumstances surrounding the situation will help you to decide what option is the best.