Trusts were once thought of as something that only the very wealthy need have -- people of more modest means made do with ordinary wills to pass what they had on to their heirs.
However, trusts are increasingly becoming the modern way to pass money on to the next generation even among middle class Americans. Trusts often preserve a family's hard-earned wealth better than a will, which accounts for their growing popularity.
If you're considering a trust, it's important to understand the main differences between a revocable and irrevocable trust.
Revocable trust basics
A revocable, or "living," trust is established during the grantor's lifetime. He or she retains control over the trust and can revoke it or change it at any time. It's chief advantage is that assets that are in the trust can automatically be moved to an irrevocable trust when the grantor dies, which keeps those assets from being subject to probate taxes.
Irrevocable trust basics
Irrevocable trusts, once they are created, are outside of the grantor's control. They are controlled by a trustee and cannot be altered without the trustee's permission. One of their chief benefits is that the assets they hold are usually protected from an individual heir's creditors -- which is not true for a revocable trust. Irrevocable trusts are also often multi-generational, in that they are designed to benefit both the grantor's current and future heirs (such as grandchildren not yet born).
Another benefit of an irrevocable trust over a will is that it is much harder for the beneficiaries to squabble over -- and a trustee can often rein in an heir that is a spendthrift and keep him or her from depleting assets that should last a lifetime.
For more information on trusts and other vehicles that can help you manage your assets and preserve them for your heirs, talk to an attorney today.
Source: FindLaw, "Types of Trusts," accessed July 14, 2017