Most people are familiar with what a will and last testament does, even if they do not have one themselves. However, many people have no idea what the will’s cousin document, the living trust, does.
Living trusts are a wonderful addition to many comprehensive estate plans. They function very similar to wills, just with some additional caveats and benefits. There are two types of living trust: revocable and irrevocable.
What is a revocable living trust?
The revocable living trust is the most common type of living trust. With a revocable living trust, anything that you put into the trust remains your own property until death. Additionally, you can make as many adjustments to a revocable living trust as you like as long as you are alive.
The major benefit to a revocable living trust is that anything you put in the trust will bypass the probate courts. This means that you’re named beneficiaries will be able to access whatever you put in the trust much quicker. Additionally, a revocable living trust does not become part of public record. Thus, they are good for keeping things private.
What is an irrevocable living trust?
With an irrevocable living trust, once you create the trust and put assets into it those assets belong to the trust. You cannot make any changes to an irrevocable living trust once you create it.
The major benefit to an irrevocable living trust is that it can help your heirs avoid estate taxes in some circumstances. Other times, people put assets into an irrevocable living trust in order to help them qualify for Medicaid benefits.