Estate planning is not a one-size-fits-all endeavor. You should tailor the exact components of your estate plan to your particular situation. However, most comprehensive estate plans involve both wills and living trusts.
Most people know what a will is, but are less familiar with living trusts. There are two main types of living trusts, according to Experian: revocable and irrevocable.
When should I choose a revocable living trust?
If your main concern is helping your heirs avoid time-consuming and costly probate court, a revocable living trust is the perfect choice. With a revocable living trust, you can make as many changes to it as you like while you are alive. Additionally, anything that is in the living trust is still your legal property until your death.
Once you die, your named successor for the trust will be able to distribute anything that is in the revocable living trust without needing to go through probate.
When should I choose an irrevocable living trust?
This type of trust is good for individuals who want to minimize the amount the government taxes their assets upon death. Once you put anything into an irrevocable living trust and finalize the paperwork, you may no longer change the trust. Additionally, you do not legally own anything that you put into an irrevocable living trust once the living trust comes into existence.
The benefits of an irrevocable living trust include giving those assets in the trust general immunity from estate taxes and creditors. Since the assets in an irrevocable living trust do not belong to you, no third party can subject these assets to liquidation.