Most people are familiar with wills, which take effect after a person dies and specify who will inherit their assets. A trust has a similar function—it is designed to transfer assets from one person, known as the grantor, to specified people or organizations, called beneficiaries.
The biggest differences between trusts and wills are the amount of control they give someone over their assets and how they are distributed. Some types of trusts also do not need to pass through the probate process and offer more privacy, which can make them an attractive estate planning option.
There are four main types of trust: revocable, irrevocable, living, and testamentary. Here’s how they’re different from one another.
What Is A Revocable Trust?
A revocable trust is the most flexible type of trust. The grantor can choose to change or revoke the trust at any time. The assets remain under the grantor’s control and are treated as personal assets. This means they are taxed normally.
What Is An Irrevocable Trust?
Irrevocable trusts are set up to protect assets and cannot be changed. The grantor gives the trust and its trustees ownership of the property and assets, meaning that they will not be available to the grantor, only the beneficiaries, as laid out in the trust.
What Is A Living Trust?
When a person sets up a living trust, it goes into effect right away. This doesn’t mean that the assets will begin distribution right away, but it does mean that if the grantor passes away, the trust will avoid probate and be available to the beneficiaries as directed.
What Is A Testamentary Trust?
A testamentary trust is set up to be created after a person’s death. Generally, a testamentary trust is created as part of the grantor’s will. This means that the trust will typically need to go through the probate process and does not offer the same amount of privacy as some other trust structures.
Which Type Of Trust Should You Choose?
If you think a trust might be a good choice for protecting and passing on your assets, it’s important to choose a trust structure that works best for your needs. If you’re more concerned about protection and privacy than access to your assets, then an irrevocable trust might be the right choice. If you want to continue owning your property and assets until your death, however, a revocable trust might be a better choice.
It’s best to speak with a knowledgeable attorney about the different types of trust and the pros and cons of each. Everyone has their own unique situation, and it’s important to get personalized advice from someone with in-depth knowledge of trusts. Give our Worcester law office a call at (774) 366-3688 to discuss your estate planning needs.