A trust is a legal arrangement where a trustee holds property for beneficiaries. The main distinction is whether you can change it.
Revocable trust
- You can change or cancel it during your life.
- It generally avoids probate for assets titled in it.
- You usually serve as trustee and keep control.
- It does not protect assets from your creditors or reduce estate taxes by itself.
Irrevocable trust
- It generally cannot be changed easily once created.
- Assets transferred are no longer yours for many purposes.
- It can help with estate taxes, Medicaid planning or asset protection in certain structures.
- It requires careful planning and legal advice.
Choosing
Many people use a revocable trust for probate avoidance and incapacity planning. Irrevocable trusts serve specific goals, such as life insurance trusts or special needs trusts. Each has tax and legal implications.
Next steps
- Define your goals, such as avoiding probate, protecting a child with special needs or reducing taxes.
- Meet with an estate planning attorney.
- Retitle assets into the trust as advised.
- Name a successor trustee.
- Review it periodically.
Frequently asked questions
Do I still need a will?
Usually yes, a pour-over will covers assets not in the trust.
Are trusts only for the wealthy?
No, but costs and benefits vary.