The Two Main Types of Trusts

 Posted on September 07, 2022 in Estate Planning and Probate

Estate planning trusts come in many different forms. There are trusts with specific purposes, like charitable trusts and minors’ trusts. There are trusts created by a will. If you are looking to create a trust, you have numerous options. However, the two main types of trusts you will likely work with are revocable living trusts and irrevocable living trusts. The differences between the two largely revolve around how flexible the trust is. Many people choose revocable living trusts because they are rather easy to go back and make changes to. The idea of an irrevocable trust frightens some people. However, there are numerous benefits to using irrevocable trusts, mainly related to asset protection. You should speak with an attorney about what your particular estate planning needs and goals are before settling on a type of trust. 

What Is a Revocable Living Trust?

A revocable living trust is the standard type used by estate planning lawyers. When you create one of these trusts, you “fund” it by placing your property in the trust. Most people name themselves trustee so that they can retain control over their property. 

The advantage of a revocable living trust is that it is easy to make changes during your lifetime. You are free to go back and add or change beneficiaries, move property in and out of the trust, change your successor trustee appointment, change your instructions for posthumous distribution, and more. You can also revoke the trust entirely if you feel that it is no longer serving its purpose effectively. 

What Is an Irrevocable Trust?

An irrevocable trust works very much like a revocable living trust, except that you cannot change or revoke the trust - at least not easily. If you are wondering why anyone would choose this type of trust knowing that they are stuck with it once it is signed, it is for the asset protection features. 

If you or your beneficiaries have a lot of debts or liabilities, then an irrevocable trust may be the way to go. Since neither you nor your beneficiaries can withdraw money from the trust at will, your creditors cannot compel you to do so. This can effectively keep creditors from taking trust assets. 

While they may be called “irrevocable,” there are legal mechanisms for cancelling one of these trusts in the event that its original purpose has been frustrated or the trust is no longer practicable. However, it is considerably more difficult than changing a revocable trust. 

Call a Texas Trust Attorney

Geoff Mayfield, Attorney at Law is skilled in creating trusts that serve our clients and their loved ones well. Our Comal County trust lawyers will review your estate planning goals and wishes to help you select the right type of trust. Call 210-535-0870 for a free consultation. 

Source:

https://www.investopedia.com/ask/answers/071615/what-difference-between-revocable-trust-and-living-trust.asp