People who want to pass assets down to their loved ones need to ensure they set up their estate plan so it reflects those wishes. Some simple estates can use the will to do this, but others may choose to use trusts. There are many types of trusts, all of which fall into two broad categories – revocable and irrevocable.
A revocable trust is sometimes called a living trust. This is a trust that the creator can dissolve or change when they feel the need. While that’s a major benefit for some individuals, they need to know a few others about revocable trusts before they decide to use one as part of their estate plan.
What are the downsides of a revocable trust?
The revocable trust doesn’t protect the assets from creditors because the creator retains control of the assets. This means that a creditor can sue the trust’s creator, and the contents of the trust may have to be used to satisfy a judgment.
Another downside to the revocable trust is that the contents are taxable when the creator passes away. While Nevada doesn’t have a state income tax, the contents of a revocable trust are subjected to federal taxes. For higher-value assets, this can take away a good portion of the inheritance for beneficiaries.
Coming up with a comprehensive estate plan is crucial for all adults. If you want your estate plan to reap the benefits of a trust, be sure to work with someone who can help you determine which specific trust can meet your needs. This helps to ensure you have wealth preservation that benefits your beneficiaries.