Through estate planning, you are empowered to secure your financial future and control how your assets are distributed after your passing. While a will is the cornerstone of a sound plan, trusts can add further strength.
Once you decide to include one or more trusts, you must decide between a revocable trust and an irrevocable trust. Each offers distinct advantages, and understanding their differences can help you make an informed choice.
What is a revocable trust?
A revocable (or living) trust gives you control over the assets it holds during your lifetime. You may modify or even revoke the trust at any time, providing flexibility as circumstances change.
Additionally, this type of trust provides efficiency in estate administration by bypassing probate, which minimizes delays and expenses. It also keeps asset distribution confidential – unlike a will, which becomes part of the public record.
What is an irrevocable trust?
An irrevocable trust cannot be altered once established because the grantor relinquishes control over the assets. This can provide significant benefits in terms of tax planning and asset protection.
Specific benefits of an irrevocable trust include:
- The assets in an irrevocable trust may be excluded from estate taxes.
- Creditors generally cannot access assets held in an irrevocable trust.
- Properly structured irrevocable trusts can help with eligibility for long-term care assistance.
When choosing between these two trust types, consider your needs and goals. For instance, do you value the flexibility revocable trusts provide or do you favor the asset protections irrevocable trusts offer?
Consulting a Pennsylvania estate planning representative can help you determine the best options for your unique situation.
