Most Americans are familiar with what a will does, but living trusts are far more opaque. The reality is that the most comprehensive estate plans often involve both a will and a trust, if not several different trusts.
Living trusts can provide a lot of flexibility in your estate planning process. To this end, there are two different types of living trusts: irrevocable and revocable.
How is a living trust different from a will?
One of the biggest benefits of a living trust is that anything that you put into a living trust will not go through probate. Anything that you pass down to your heirs through a will needs to go through the probate process, and this can potentially take years.
Living trusts are a great way to maintain your privacy. They also can be a much more efficient way to get your heirs their assets. You may even be able to protect your assets from creditors with a well-placed living trust.
What do the different living trusts do?
A revocable living trust is the more flexible of the two. Anything that you put into a revocable trust remains your property until your death and you can manipulate the trust as much as you like. The main benefit of a revocable trust is that it avoids probate court.
Irrevocable living trusts are more stringent. Once you create an irrevocable living trust, anything you put into the trust is no longer your property. The main benefit of an irrevocable living trust is that it can protect your assets from creditors and help your heirs avoid estate taxes.