You may know what a last will and testament are, but do you know what living trusts are? While everybody should have a last will and testament, many Americans find that adding living trusts to their estate helps create a more nuanced plan.
Living trusts offer many benefits and options that a traditional will cannot. According to Experian, there are two types of living trust: revocable and irrevocable.
What can a revocable trust do?
The basics of a revocable trust are very similar to a will. Essentially, you create the trust and then you place whatever assets you wish inside of the trust. You can make as many changes to a revocable trust as you like while you are alive. Additionally, anything that you put into a revocable trust remains your personal property until death.
The big benefit of a revocable trust is that the assets inside do not go through probate. Probate is very expensive and time-consuming, so smart use of revocable trusts can ensure that your beneficiaries receive their inheritance quickly.
What can an irrevocable trust do?
Irrevocable trusts look similar to revocable trusts, with the major exception of you being unable to make any changes to the trust once you create it. Additionally, anything that you put inside of an irrevocable trust becomes the legal property of the trust and is not your personal property any longer.
Irrevocable trusts can help your estate avoid estate taxes since anything inside of them is not your personal property. A combination of revocable trusts, irrevocable trusts and a will and testament can create a very extensive and nuanced estate plan.