Sure, there has been a mass vaccination worldwide. However, we aren’t sure as to when the crisis will end. Even if it does, there might be another pandemic in the future. That is not to mention the many possibilities that can endanger people’s lives. Hence, we should come in ready for what lies ahead.
In a legal sense, it’s best to set your estate planning in place. This legal action is a great way to prepare for the future. It entails preparing the tasks for managing your assets in the event of your death or incapacitation.
When it comes to estate planning, you may have heard of revocable and irrevocable trusts. In this article, we’ll tackle the difference between the two. Keep on reading to learn more.
Revocable Trust vs. Irrevocable Trust
In a nutshell, a trust is a legal process of transferring an estate. It allows you to authorize a party to manage your assets and distribute them to your beneficiaries. There is more to it than what you might think it is. However, it all boils down to two basic categories:
- Revocable Trust: It is a trust set up during your lifetime, where you can change at any time. Also called a living trust, it allows you to assign a third party to manage your assets. The party known as a trustee will handle your assets and distribute them accordingly when you die. However, you can modify the terms at any time. It means that you can remove your beneficiaries, assign new ones, and alter some terms stipulated in your trust.
- Irrevocable Trust: It is also a trust set up during your lifetime. But as the name suggests, you can no longer change the terms after setting it up. You can only do so with the consent of your beneficiaries. It means that it removes your ownership and control over the assets. However, many individuals resort to irrevocable trust due to tax advantages. It means you aren’t subject to estate tax during your lifetime and in the event of your death.
Trust vs. Will
In line with understanding trust, it’s best to distinguish it from a will. In general, trust and will are both estate planning tools. It means that they determine how your assets will be distributed to your heirs when you pass away. However, the main difference is that a trust can skip a probate court. Take note of the following:
- Trust: As mentioned above, a trust allows you to assign a third party. It gives them the authority to handle and distribute your assets for the benefit of your beneficiaries. Know that you can use a will to create a testamentary trust. But to avoid the probate court, you can set up a revocable trust instead.
- Will: A will allows you to express your wish about how your assets will get distributed in the event of your death. Aside from naming the beneficiaries who will receive your assets (property, finances, and other assets), this legal option includes naming a guardian for your children. But unlike a trust, this becomes active only upon your death. And probate ensues to grant your will’s wishes legally.
The Need for Estate Planning amid the COVID-19 Pandemic
Estate planning is crucial during this unprecedented time. The truth is, you don’t know when you will expire. But as you’re still alive, you want to manage your assets the best way you can.
As much as possible, you want these assets handled within the bounds of the law. That way, they will end up in the hands of the right people in case you die. Also, doing so can avoid disagreements and conflicts among family members and relatives when you pass away.
There are a handful of ways to set your estate planning in place. Aside from writing a will and setting up a trust, you can also assign a power of attorney (POA), designate a health surrogate, and even have Medicaid planning.
At this point, you know why it’s crucial to set estate planning amid the COVID-19 crisis. Most importantly, you now know the difference between revocable and irrevocable trust. You also have an idea about whether to create a trust or write a will.
That said, be sure to consider all the valuable information discussed above. Also, consider hiring an estate planning attorney who can help you decide on the legal options available to you. Ultimately, your hired lawyer will set everything in place for you as far as estate planning is concerned.