Setting up a trust may not be enough to protect the money you wish to bequest to your loved ones. There are instances where the trust may not cover a particular asset. And in some instances, a prepared trust may not cover the asset at all.
It is a good idea to double-check such items to make certain you miss nothing. When preparing a trust, it is important to prepare it right. And it’s important to choose the right trust.
When creating an inheritance trust, it is possible to create a revocable or irrevocable trust. As one recent article points out, there are advantages and disadvantages to each.
Setting up a revocable trust
As the name implies, a revocable trust can be subject to alteration. This allows you to change the terms of the trust simply in the event you change your mind.
While a revocable trust can allow you to avoid probate, estate taxes will remain an issue. The reason why this is the case is that such assets are still included in your estate.
The primary advantage of a revocable trust is to allow for you to manage assets for trustees who may not be up for the job of managing them for you.
Setting up an irrevocable trust
You cannot alter an irrevocable trust once putting it into place. And as you are transferring assets away from yourself when creating an irrevocable trust, these assets will not become a part of your taxable estate. Having an irrevocable trust in place may also allow for you to take advantage of government benefits you could not otherwise obtain if the assets were outside of the trust.
Obviously, the disadvantage of this sort of trust is that you are relinquishing control of those assets. Without doing this, you may not enjoy the tax benefits or the ability to qualify for particular benefits.
Since so much is at stake, it’s important to understand all of your options before deciding upon what sort of trust to prepare. It is also necessary to prepare a trust correctly.