When it comes to estate planning, two of the most common options are creating a will or setting up a trust. A trust is a legal agreement that allows ownership of an asset to be transferred, managed by a third party, and distributed to the beneficiaries at any time determined by the creator of the trust. There are various types of trusts, but some common factors to consider include whether it is revocable or irrevocable. A revocable trust is one that is created while you are alive and can be altered, changed, amended or revoked while you are still alive.
In addition to the control and rights of the Trust during its lifetime, the grantor also reserves the right to modify or revoke the Trust at any time. The term living trust can also be used to describe an irrevocable trust that is created while you are alive and well, thus making it an irrevocable living trust. For example, “revocable trust” and “revocable living trust” (these three terms can be used interchangeably) refer to a trust that is created while you are alive and well and can be altered, changed, amended or revoked while you are still alive. An irrevocable trust is a type of trust that cannot be modified or revoked once it has been created, without the consent of the beneficiaries. Unlike a will, an active trust is the legal owner of all the assets and property that you fund it with.
This property does not have to go through the probate process, as you have transferred it from your personal assets to the trust. You can still maintain control of this property throughout your life. For most people, a will is sufficient for their estate planning needs, but you may want to use an active trust to prevent your estate from being subject to probate and give your beneficiaries access to what they are entitled to as soon as you die. If you're trying to create an active trust but don't transfer any assets to it except through your will, the property must be processed as a testamentary trust. When preparing your estate for after your death, it's important to understand the difference between revocable trusts and irrevocable trusts. A revocable trust allows you to maintain control over your assets during your lifetime and can be modified or revoked at any time.
An irrevocable trust cannot be modified or revoked without the consent of the beneficiaries and is legally owned by the trust once it has been created.