Inheriting Property Explained: Revocable Trust vs. Irrevocable Trust vs. Will

One of life's important and often complicated mysteries is property inheritance. It can be a big question in one's life - how to go about the inheritance of your family home. Should you set up a trust? Which type of trust? Should you write a will? Which solution will protect your property and your loved ones the best?

There are many questions that come up when trying to make the best decision. And if you're a novice to the world of inheritance, finding the answers can be tricky. So that is precisely why we're here - to explain three common terms you should understand when it comes to inheriting property.

Today, we're talking about revocable trust, irrevocable trust, and wills. Which one is the best option for you? Find out by reading the rest.

First Things First - What Is a Trust?

A trust is an arrangement in which one person, called a trustee, controls property or assets for another person, called a beneficiary. The trustee can be an individual, a corporation, or even a financial institution like a bank. The beneficiary is the person who will eventually inherit the assets.

There are different types of trusts, and their terms determine what happens with your asset, how selling property held in trust is possible, if you can revoke and change the trust, when your assets are distributed, etc.
The most common type of trust is created by a will and is known as a testamentary trust. This trust only comes into existence after the death of the person who created it (the grantor). Another common type of trust is created during the grantor's lifetime and is known as a living trust. There are two kinds of living trusts - revocable or irrevocable.

Revocable Trust 101

As the name suggests, a revocable trust is a type of trust that can be revoked or changed by the grantor at any time. This means that the grantor retains complete control over the assets in the trust during their lifetime.

If you're the trustee of a revocable trust, you have the power to make changes to the trust document during your lifetime. You can also revoke or dissolve the trust entirely.

How Does Revocable Trust Work

A revocable trust, otherwise known as a living trust, is created during your lifetime. You can name yourself as the trustee and beneficiary of the trust. This means that you have complete control over the assets in the trust.

You can make changes to the trust at any time, and you can revoke it entirely if you wish. The main advantage of a revocable trust is that it can help you avoid probate. Probate is the legal process used to distribute a person's assets after their death. If you have a will, your assets will go through probate. This is often a time-consuming and expensive process.

If you have a revocable trust, your assets can be distributed without going through the probate process. This can save your loved ones time and money.

What Is Irrevocable Trust

An irrevocable trust is a trust that can't be modified or revoked after it's been created. So, it cannot be altered or dissolved without the permission of the beneficiaries. Once you create an irrevocable trust, you give up all control over the assets placed into it.

Creating an irrevocable trust is a big decision. Once you create the trust, you won't be able to modify it. So, you need to be sure that you understand the terms of the trust and that you're comfortable with them.

If you're thinking about creating an irrevocable trust, it's best to talk to a qualified attorney. They can help you understand the pros and cons of this type of trust and help you decide if it's right for you.

Why Create an Irrevocable Trust?

Irrevocable trusts are created for a variety of reasons. The most common reason is to protect assets from creditors. When you place assets into an irrevocable trust, you give up all control over them. This means that creditors cannot reach the assets if you become unable to pay your debts.

Another common reason to create an irrevocable trust is to minimize estate taxes. When you die, your estate will be subject to estate taxes. If you have an irrevocable trust, your assets will not be included in your estate. This can help to reduce the amount of taxes that your loved ones will have to pay.

What Is a Will?

A will is a legal document that outlines how you would like your property to be distributed after you die. Unlike a trust, a will does not take effect until after you die. Wills must go through probate, a legal process that often requires a lot of time and money.

How Do Wills Work?

If you have a will, your executor will be responsible for carrying out your wishes. They will need to locate all of your assets and make sure that they are distributed according to your instructions. This can be a complex and daunting task.

It's important to note that not all property can be distributed through a will. Some types of property, such as retirement accounts and life insurance policies, have beneficiary designation forms. This means that you can name who you want to receive this property outside of your will.
If you die without a will, your assets will be distributed according to your state's laws of intestate succession. This means that your property will go to your closest relatives, regardless of your wishes.

If you're thinking about creating a will, it's vital to understand the ins and outs of this procedure. We advise you to consult an attorney to help you understand the process and ensure that your wishes are carried out according to your instructions.

What Is the Best Option for You?

So, you have a few options, and now you have more insight into the different types of trusts and how they work. The decision is, of course, completely up to you. The best choice will depend on your individual circumstances. For instance, if you're trying to protect your assets from creditors, an irrevocable trust may be the best option. However, if you're not concerned about these issues, a will may be an option to consider.

You should also have some emotional considerations and think about your loved ones, especially if there are multiple heirs.

But no matter your circumstances, we always suggest consulting an attorney before making any big decisions. They can help you understand the pros and cons of each option and help you choose the best choice for your needs.