Estate planning is essential to protecting your assets and property and protecting your loved ones if you pass away or become incapacitated. Most people associate estate planning with wills and powers of attorney, but only some know of trusts and how helpful these can be.
What is a trust?
A trust is a legal arrangement in which a grantor puts assets into a trust and assigns a trustee to manage it on behalf of one or more beneficiaries. There are two types of trusts: revocable and irrevocable trusts.
A revocable or living trust is the most common. It allows the grantor to retain control of the assets during their lifetime and as long as they are not mentally incapacitated.
The grantor typically assigns a trustee to manage the assets, but the grantor retains all control and can take assets out of the trust as they wish.
On the other hand, an irrevocable trust is irrevocable as its name states, and the grantor does not retain any rights to it unless the grantor specifies otherwise in the trust documents.
For example, the grantor can create an irrevocable trust in which the assets are kept for the grantor’s care when they get older and cannot care for themselves.
Trusts are valuable tools in estate planning and can help people avoid the lengthy and costly probate process. Creating a trust can help you protect your assets, maintain the privacy of your assets and beneficiaries and, in some cases, reduce taxes.