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If you are starting the process of planning your estate, you should know about trusts. Most people assume their only option is to have a will, but many people choose to leave a trust instead. Keep in mind, a trust is not for everyone, but it does offer a few advantages that a will does not. Additionally, there are two types of trusts: irrevocable trusts and revocable trusts, which are sometimes called living trusts. This guide will provide all the information you need to decide whether a trust would be better than a will for you.
What Is a Trust?
A trust is essentially an agreement to pass belongings on. Someone who sets up a trust takes the role of benefactor. He or she gives a set of possessions or money to a trustee, who will hold onto the items until the conditions of the trust are met. Often, this condition will be the death of the benefactor, but the condition can be anything you want. At the time the condition is met, all the possessions are passed onto the beneficiary following the benefactor’s instructions. The main advantages a trust has over a will are:
- Avoid estate taxes
- Avoid probate
- Set conditions for who gets what
Generally, probate and estate taxes are not very significant. Unless you have a reason to suspect that your estate will be taxed more than usual or probate will last unusually long, these are only minor benefits.
Revocable vs. Irrevocable Trusts
If a trust is revocable, it means the contents of the trust can still be accessed by the benefactor. This is also called a living trust. If a trust is irrevocable, then no one can ever access the contents unless the condition is met. In most cases, there is no reason to set up an irrevocable trust instead of a revocable one. After all, you will likely want to live off your estate instead of having it be inaccessible.
The main reason some people choose an irrevocable trust is to intentionally make the trust as inaccessible as possible. This can be useful for avoiding debt collectors or other rare or shady activity. Chances are, if you are considering using a trust to leave your estate to your friends or family, a revocable trust is the way to go. This type of trust is also called a living trust. Speaking to a Sacramento living trust lawyer is the best way to learn more about your options and to make your decision.
Thanks to the Yee Law Group for their insight into estate planning and living trusts.