Estate planning is an important part of life that’s best dealt with earlier rather than later. Having a plan in the event of your death creates a degree of peace of mind for both your family and yourself, assuring you that your assets and possessions will be accounted for and that the people you care about will be taken care of when you’re no longer there to do it yourself. It is, however, a complex process, and one that you’ll need to do your research about to make sure you’re making the right choice for yourself and your family.
While there are a lot of moving parts to keep track of at multiple stages of the process, estate planning essentially boils down to creating a simple will that outlines your wishes for your possessions and a trust that ensures that the instructions left in your will are going to be carried out. But there’s more than one type of trust, and choosing the right one for you may make a major difference in how your will is carried out after you’re gone.
Specifically, there are six major types of trusts, with a variety of subcategories for each of them: revocable trusts and irrevocable trusts, living and testamentary trusts, and funded or unfunded trusts.
You may choose to go with any of these options for any number of reasons, but to make the most informed choice, you need to know how they work individually and the differences between them. In this blog post, we’ll do exactly that, exploring each category of trust as well as the differences you can expect from each of them.
Revocable and irrevocable trusts
Revocable trusts allow you to change the terms of the trust or end it entirely during your lifetime, giving you a greater degree of flexibility and control to update the details of your trust as time goes on and circumstances change. Irrevocable trusts, on the other hand, can’t be changed once they’ve been established, and once you’ve died, they cannot be terminated and must be adhered to. Other trust categories mentioned in this blog post may also belong to either of these.
While a revocable trust gives you the opportunity to make changes to your trust as they seem to become necessary, irrevocable trusts are typically more desirable for most people. This is because they’re a great way to minimize estate taxes which your heirs may otherwise have to pay for the possessions you’ve left to them.
Living or testamentary trusts
A living trust provides you the opportunity to use the assets you’re leaving for your inheritors up until the time of your death, at which point the trustee will begin the process of transferring their ownership to those inheritors. A testamentary trust doesn’t cover any information as far as your current usage of the assets included in your will are concerned; it simply outlines what is to be done with those assets after your death.
A revocable or irrevocable trust can also be a living one, but testamentary trusts can only be irrevocable.
Funded or unfunded trusts
Funded trusts are funded by your monetary contributions over time, whereas unfunded trusts consist only of the trust agreement. Funding for your trust is important for navigating many of the pitfalls, particularly in the form of taxes, unsettled debts, and other additional fees, that come with the inheritance process. As a result, funded trusts are not only the more popular and worthwhile option, they’re one that you should be preparing for at as early of a point in life as possible.
Choosing the right type of trust for you
Certain types of trusts are better for many people’s needs, but your circumstances may not be average ones. Either way, it’s important to have access to experience and expertise when planning and executing your trust agreement. Work with a Tampa trust lawyer through Candela Law Firm to ensure proper planning and a smooth process for your heirs in the future. Contact us now for more information about how we can help.