With a new year around the corner, people in Ohio may be focused on getting their finances in order. Along with making sure their will is up to date, some may be thinking of setting up a trust. As a way of preserving and passing on wealth, a trust can be beneficial in certain situations. When setting up a trust, the owner needs to decide whether it is revocable or irrevocable.
According to US News, both types of trusts contain assets such as money and property, but a revocable trust can be changed or revoked by the owner while an irrevocable trust cannot. While the owner of a revocable trust has more control, this type of trust has fewer potential advantages than an irrevocable one. It is, however, a more popular choice, as an irrevocable trust tends to only be beneficial for the wealthy. A revocable trust helps people manage their assets while they are living and ensure they will be administered responsibly when the owner can no longer manage their own finances, either upon death or due to diminished mental capacity.
The main advantages of an irrevocable trust are tax-related. According to FindLaw, this trust also protects the assets from the beneficiaries' creditors. Because any change of an irrevocable trust requires permission from all the beneficiaries and the trustee, this type may prevent fights and misuse of the funds in the event the beneficiaries cannot agree on their utilization. Because owners give up control of the trust, consulting with an attorney is a smart idea before making this major financial decision.