Revocable trusts or an irrevocable trust?
What is a trust anyway? With a trust, you create a legal entity for your assets and appoint a trustee to manage it. (You can even appoint yourself.)
Know the uses
People often use trusts to stipulate control of their assets should they become incapacitated or die before their minor children. They can distribute wealth in complicated situations, like to children from more than one marriage. You can also use a trust fund to:
Fund a scholarship
Create a charitable organization
Support a business
Weight trade-offs
Different trusts have different benefits and drawbacks. Revocable trusts let you change the terms and the beneficiaries as you wish. Irrevocable trusts are more fixed, but they can help you save on taxes. For example, an irrevocable life insurance trust can reduce your estate taxes if you have a large policy.
You should consult a tax advisor to find out which trust is best for your situation.
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Find your type trust
A living trust and a testamentary trust are two ways of managing your assets for your beneficiaries.
A living trust is created while you are alive and lets you access and control your assets during your lifetime. A testamentary trust is created when you die and is based on your will. A living trust can help you avoid probate and reduce taxes, but it may be more expensive and complex to set up than a testamentary trust.
A testamentary trust is simpler and cheaper to create, but it has to go through probate and may have higher taxes. You should consult a professional to decide which type of trust is best for your situation.
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