It is true that most Americans do not have a last will and testament. However, it is also true that most Americans understand the purpose of such a document, even if they do not have one themselves. On the other hand, the purpose of a living trust is often more opaque.
Living trusts can play a very robust role when estate planning. According to Experian, the two main types of a living trust are revocable and irrevocable.
What is a revocable trust?
This kind of trust is the most flexible. Once you create the trust and put your desired assets into it, you can then make as many changes to it as you like before you die. Additionally, any assets that you place inside of a revocable living trust remain your personal possessions until death.
The main purpose of a revocable living trust is to help your heirs avoid probate. Anything that you put into a living trust goes directly to your beneficiaries through your chosen executor. This can ensure that your heirs receive your assets in a more timely manner.
What is an irrevocable trust?
Once you create and fill an irrevocable trust, you cannot make any changes to it. Anything that is inside of an irrevocable trust becomes the property of the trust. The main benefit associated with irrevocable trust is that anything inside of it will avoid estate tax. Additionally, creditors may not garnish assets inside of an irrevocable trust.
Revocable and irrevocable trusts are very powerful estate planning tools. They can help ensure that your heirs get the most out of your estate as quickly as possible.