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What to Consider When Deciding Between a Revocable and Irrevocable Trust

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Trust funds are not just for the ultra rich. These sophisticated estate-planning tools can make just as much sense for middle-class Americans who own a home and have a net worth of at least $100,000. Although they can be set up differently, all trusts are either revocable or irrevocable. "A revocable trust is like the minivan of estate planning," says Steve Parrish, co-director of the Center for Retirement Income at the American College of Financial Services. "They are multipurpose and used more by the upper-middle class. An irrevocable trust is like a high-performance sports car. They can be more expensive but also more customizable to a specific need."

As a legal entity, a trust can own assets such as real estate, brokerage accounts, life insurance, vehicles, bank accounts and personal belongings like jewelry. You transfer over the title and ownership of these assets to the trust, which stipulates what should happen to that property after you die, including who should receive it and when.

A trust has three main parties. The grantor is the person depositing assets into the trust. The beneficiary is the person who receives the assets and income. A trust can have one or more beneficiaries. The person or organization overseeing the trust assets is called the trustee. The trustee distributes the assets according to the trust document and files the trust's tax returns when needed.

One person can fill multiple roles. For example, you could set up a trust as the grantor and also manage it yourself as the trustee while you're alive, thereby eliminating the need for a paid professional. The same person you appoint as executor of your will can also be named as your trustee or successor trustee. Once you've put assets into a trust, your ability to alter it or get the assets back will depend on whether the trust is revocable or irrevocable.

A revocable trust keeps your options open. As the grantor, you can amend or revoke the trust at any point, and that includes naming a different trustee or beneficiary. "This gives you........

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