If you choose to leave your assets and wealth in the form of a trust when you pass on, you may be able to protect it and keep it private. Many people create a trust before dying, and all their assets go into the trust upon death. Specific instructions are written up about how the wealth should be distributed, and they must be followed. The person or people receiving the benefits of the trust are called trustees.
There are many benefits to choosing a trust. They give you total control over how your beneficiaries will receive their money, allow your estate to bypass probate, save on court fees and taxes, and control your wealth while protecting your legacy. While there are many types of trusts, the most basic are the revocable trust and the irrevocable trust.
An irrevocable trust cannot be changed, modified, revoked or altered after it has been created. Transferring property to an irrevocable trust means that not even the trustmaker can remove that property from the trust. Once the estate is placed in an irrevocable trust, it is not possible to remove or change it. An irrevocable trust may be used to hold benefits from a survivorship life insurance plan, often used in larger estates, but this can have serious negative consequences for the trust and beneficiaries.
A revocable trust can be changed, altered, modified or even revoked as the trustmaker sees fit. These are also often referred to as living trusts. Revocable trusts are often used to avoid probate, and the trustmaker is the one who acts as the first trustee. The property can be removed at any time during his or her lifetime. Assets in a revocable trust are still subject to creditors after the trustmaker passes away, although it is more complicated to access the funds. Once the individual passes away, a revocable trust is transferred to an irrevocable trust and the conditions cannot be changed.
Other types of trusts
There are many other types of trusts, including:
- Charitable trusts
- Special-needs trusts
- Constructive trusts
- Spendthrift trusts
- Tax bypass trusts
- Asset protection trusts
Every estate is unique, and every individual has different needs when it comes to protecting assets after death. An attorney may be able to answer any questions you have about trusts, their benefits and which one is ideal for your situation.