When creating your estate plan as a California resident, you might want to include a trust. You should know the differences between revocable and irrevocable trusts so you can choose the one that’s appropriate for you.
What is a revocable trust?
A revocable trust, or living trust, allows you to hold assets within during your lifetime and can be changed whenever you see fit. You can either name a trustee to manage the trust or oversee it yourself.
This type of trust is one of the best estate planning tools. Any assets or property you fund it with can avoid the probate process, which can be timely and prevent your beneficiaries from receiving their inheritance sooner. Additionally, anything held inside a revocable trust stays off public record.
What is an irrevocable trust?
Unlike a revocable trust, you cannot make changes to an irrevocable trust. Anything placed inside by the grantor cannot be removed. It’s protected from creditors and lawsuits. Any assets and property in the trust is no longer considered part of the grantor’s estate, which means they are not taxable.
Which trust is better for you?
Certain factors should be considered when deciding whether you should have a revocable or irrevocable trust. If you want to control the assets and make changes at any time, a revocable trust is for you.
If you wish for your assets and property to avoid probate after you die, choose a revocable trust.
However, if you prefer to avoid having certain assets taxed as part of your estate after you’re gone, an irrevocable trust is the better option.
Depending on your needs, you might prefer one of these trusts over the other.