Trusts are arrangements that allow a trustee to hold valuable assets on behalf of beneficiaries. There are several ways to arrange trusts that detail when and how the assets will be passed to the designated beneficiaries. If you’re an Alabama resident and need to know more about estate planning, here are some important things to know about setting up a trust.
Benefits of a trust
Trusts are essential for estate planning and allow you to have more control over your wealth. You can determine the terms of the trust to control when the asset distributions will be made and who the assets will be assigned to. You can also create a revocable trust to keep the assets accessible to you while you’re alive and designate who the remaining assets will go to when you pass away.
Revocable and irrevocable trusts
There are several types of trusts, and it is important to know the differences between the trusts so you’ll know if you want to have a revocable or irrevocable trust for estate planning purposes.
A revocable trust is also called a living trust and helps assets pass to beneficiaries outside of probate. You have control of the assets during your lifetime and can dissolve the trust at any time. Upon your death, the trust will automatically become irrevocable.
An irrevocable trust usually transfers your assets from your estate and exempts you from probate and estate taxes. However, the trust generally can not be changed after you’ve executed it. Once you establish an irrevocable trust, you will no longer have control over your assets and can not dissolve the trust or change the terms.