One of the primary tasks that an estate plan accomplishes is to pass assets down to the intended beneficiaries. This can be done in the will, but there’s also an option to establish trusts. All trusts are classified as either revocable or irrevocable, and the distinction between those is important.
Both types of trusts enable the creator to get assets to the beneficiaries without having to go through the probate process. This provides them with a bit of privacy because the terms of the trust aren’t part of the public record.
Differences between revocable and irrevocable trusts
The creator of the trust can alter the terms or void the trust if it’s revocable. If the trust is irrevocable, they can’t do either of those unless the court or all the beneficiaries approve. A creator can serve as the trustee of a revocable trust, but they must appoint a trustee for an irrevocable trust.
The inability to change or control an irrevocable trust may seem like a negative point, but it provides the beneficiaries with protection from the creator’s creditors. Since the creator doesn’t have control over the assets, their creditors can’t stake a claim to those assets in an effort to settle a debt.
It’s critical that trusts are properly established so they can provide the benefits intended. They are only one part of a comprehensive estate plan, so working with someone familiar with the creator’s situation and applicable estate planning laws can help to ensure things are set up in a legally enforceable manner.