Determining who receives your assets after your death is difficult enough, and that is before the paperwork gets involved. One of the best tools in this planning process is a living trust, which can help ensure that your assets go to your intended beneficiaries as quickly as possible with little fuss.
Living trusts are similar to their better-known compatriot, the will, but with a specific set of advantages. One of the major advantages of a living trust is that the assets you put inside of it will bypass probate, which can be expensive and time-consuming. Living trusts are also a great way to ensure privacy. Probate is a public process, meaning that the procedures will be part of public record. With a living trust, things stay private.
Another advantage of living trusts is that, in certain circumstances, you can use them to help protect your assets from the government and creditors if you handle them properly.
What is the best type of trust for protecting my assets?
There are two major types of living trusts: revocable and irrevocable. Revocable trusts are popular since you still retain ownership of any assets in the trust until you die. You can also make as many modifications to the trust as you would like. Upon your death, all of the assets you placed into the trust are part of your estate, and the person you named as the successor trustee will dole out the contents of the trust according to your wishes.
The main purpose of a revocable trust is to help your heirs avoid probate. A revocable trust will not protect your assets from creditors because you still legally own the assets in the trust until you die. After you die, a revocable trust ceases to exist after the trustee distributes the assets.
On the other hand, an irrevocable trust is a permanent arrangement that you cannot change after you sign the paperwork. Any assets you place into the trust cease to be your personal property: they are instead the property of the trust. With assets in an irrevocable trust, creditors cannot come after your assets since they no longer belong to you. However, if the law discovers that you purposefully put assets into an irrevocable trust to avoid taxes or defraud creditors, there may be legal consequences. People typically create irrevocable trusts to avoid estate taxes, since the government does not consider the assets in the trust part of your estate.
Should I start an irrevocable trust to safeguard my assets?
This depends on your particular situation. There are multiple kinds of irrevocable trusts that you can choose from: an irrevocable life insurance trust, irrevocable marital trusts, charitable remainder trusts, and more. In some situations, an irrevocable living trust of any sort is not the right choice.
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You may also wish to create a will in addition to trusts, as there are some things that only a will can do. A living trust of either sort will only encompass the assets that you actively put in the trusts, while a will universally applies to all of your property. Wills can also be used to do things like appoint guardians of minors, whereas a trust cannot do this. Contact us today at AmeriEstate to learn more about what estate planning approaches will work best for you.