A trust is a vehicle through which you can leave assets after your death to specific heirs in specific ways. This type of arrangement gives you a lot of control over the handling of your assets.
NerdWallet explains there are a few different types of trusts. However, all trusts are either revocable or irrevocable.
Revocable vs. irrevocable
A revocable trust is one that you can change after you create it. You may hear it called a living trust because as long as you are alive, you can alter the terms. Once you die, it becomes locked and will distribute assets however you had it set up at that time.
An irrevocable trust is one you cannot change after you create it. There is the ability to make limited changes with the approval of the beneficiaries of the trust, but this can be difficult to do.
In addition, with a revocable trust, you own the assets until you die. With an irrevocable trust, the ownership transfer to the trust as soon as you create it.
Types of trusts
One of the best things about trusts, whether revocable or irrevocable, is you can create them any way you want. You can choose the details and the requirements of the trust. You can shape it to be whatever you want.
For example, you can create a trust that an heir can only use for a specific purpose, such as education, or that will only disburse according to a schedule you set, such as giving half the money at the heir’s 30th birthday and the other half at the 40th birthday.
You can also create trusts for pets that ensure they receive proper care after your death. You can make a trust for charitable giving or for the care of a child with special needs.
Trusts allow you to have more control over what happens with the assets you worked so hard to get.