What type of trust should you choose?

There are many different types of trust, which can make it hard to choose a trust. However, there are only two initial choices to make that will really help narrow down your choice. The two initial choices are whether you want a revocable or an irrevocable trust.

A revocable trust is one that can be changed or revoked at any time while you are alive. An irrevocable trust is one that cannot be changed or revoked without some difficulty that usually includes the cooperation of the trustee and beneficiaries. A revocable trust ends up being the best choice for most individuals because it is more flexible while you are alive.

The main reasons to consider an irrevocable trust are if your wealth exceeds the estate tax amount ($13,610,000 in 2024), protection from creditors, tax benefits if you are very wealthy, or to qualify for certain government benefits. If the foregoing reasons do not apply to you, then you probably will not benefit that much from an irrevocable trust and a revocable trust is probably a better option.

If you decide on an irrevocable trust, there are many variations of irrevocable trusts. Some examples include irrevocable life insurance trusts, charitable trusts, Medicaid trusts, asset protection trusts, generation-skipping trusts, and irrevocable homestead trusts.

If you decide on a revocable trust, then your choices are easier because there are not a ton of different variations. However, there are different provisions to include in your revocable trust depending on your circumstances.

Overall, a revocable trust is usually the best option for most people. However, if you are very wealthy, you need protection from creditors, or you need to qualify for certain public benefits, then you may want to consider an irrevocable trust.