Planning for the future is a deeply personal process, and you will make your decisions based on your own needs, personal objectives and unique goals you may have. There is no one-size-fits-all approach to estate planning, and you will benefit from discovering how you can build a plan that is both meaningful to you and effective for years to come. The first step in this process is determining which tools will best serve you and fit in with your existing estate plan.
For many in Texas, the inclusion of a trust is a beneficial step in the estate planning process. A trust is a tool that allows you to set aside assets and designate them for a specific use. There are two primary categories of trusts, revocable and irrevocable. It is important to understand the differences between these two options as this could affect how much you can control assets held within the trust.
Revocable versus irrevocable trust
A revocable trust, often called a living trust, is a popular choice because its owner has the ability to change its terms at any time. This means they can add or take away beneficiaries, modify instructions for the use of trust assets and more. While this is a more flexible type of trust, the assets held in the trust do not have protection against the claims of creditors. Trust assets are also subject to estate taxes when the owner of the trust passes away.
In contrast, it is not possible to modify an irrevocable trust once it is made. One of the primary reasons why people choose this type of trust is because it offers protection against tax penalties upon the owner’s death. The beneficiaries of irrevocable trusts are protected against tax penalties for any income generated by the trust assets. This type of trust is a popular choice for individuals who may work in professions that come with a high risk of lawsuits.
The best estate plan for you
The ideal estate plan is one created specifically for your individual needs and goals for your estate. To learn how either a revocable or irrevocable trust could be a helpful addition to your estate plan, you may want to speak with a professional who can offer insight regarding the most beneficial estate planning decisions for your specific situation.