If the time has come for you to think about estate planning, you may wonder if setting up a trust is a good idea, and if so, what kind?
There are different kinds of trusts designed to fulfill different needs. Living trusts are among the most common, and you can choose either revocable or irrevocable.
The revocable trust
As its name implies, the revocable living trust is one to which you can make changes whenever you wish. The most common reason for establishing this kind of trust is to have an estate planning tool available to accept assets if you should become incapable of managing your affairs. The court will not have to intercede; a doctor’s confirmation that you can no longer handle your own affairs is usually sufficient for a trustee to step up. A revocable trust provides privacy, and the assets are not subject to probate. Upon your death, your revocable trust becomes irrevocable and a trustee will manage it on your behalf.
The irrevocable trust
If you establish an irrevocable trust, you must be certain that this is the right choice for you. For example, you may want protection from professional liability, or you may wish to use this kind of trust to ensure the continuing support of a disabled loved one. Although anyone of any means can set up an irrevocable trust, it is often favored by wealthy individuals who appreciate the tax advantages.
The choice of trustee
If you have an irrevocable trust, you can change trustees whenever you wish. Your first choice may die unexpectedly or decide to move out of the country. Therefore, you will need to appoint a replacement, likely someone in good health who resides close by. On the other hand, you will give up control if you establish an irrevocable trust, so you want to ensure that the trustee you choose will be there for you and administer the trust according to your wishes.