If your career is winding down and retirement is on the horizon, the subject of estate planning may be on your mind.
There are many effective estate planning tools including revocable and irrevocable trusts. But what is the difference between them, and which one is best for you?
Managing assets
Establishing a revocable trust will provide protection for your assets. As the grantor, you supply instructions as to how those assets will be used following your death. As the name implies, you can change the terms of the trust as often as you like or even revoke it altogether. Through a revocable trust, you can also set a plan in motion for managing your financial affairs without the need for a court order if you should become incapacitated through illness or injury.
Relinquishing control
On the other hand, once you establish an irrevocable trust you relinquish control to the trustee you appoint. People with significant assets often set up irrevocable trusts because of the tax advantages. This kind of trust may be effective in protecting assets against creditors or where professional liability is a consideration. Another reason to establish an irrevocable trust is to ensure ongoing support for a disabled dependent.
Planning for the future
The decision to establish either a revocable or irrevocable trust largely depends on your circumstances and the amount of control you want. Like other estate planning tools, trusts can provide peace of mind for you and your family and are worthy of your careful consideration.