There are lots of different tools at your disposal for protecting your assets, including revocable and irrevocable trusts. Both of these types of trusts are used to pass assets to beneficiaries outside of probate. However, they do so differently. In today’s blog post we’ll look at the pros and cons of both of these types of trusts.
Revocable Trusts 101
If your priority is maintaining control over your assets as long as you’re still living, a revocable trust is probably the choice for you. Once you create a revocable trust and put property into it, you can continue to make changes as your needs and intentions develop over time. You can change the beneficiaries or the terms. You can even completely take back, or revoke, the trust if you decide you want to. This is all possible because you’re still considered the owner of the assets as the trustee. The downside is that this also means your creditors can still cease the assets in a revocable trust and the assets count against you when you’re trying to qualify for Medicaid. Those with considerable debt might do better to make other arrangements. You also might want to avoid it if it will interfere with your long-term care planning.
Irrevocable Trusts 101
The biggest difference with an irrevocable trust is that once it’s done it’s done. It’s no longer yours so you cannot revoke it, or take it back. As such, you won’t enjoy as much flexibility and freedom with an irrevocable trust as you would with a revocable trust. You don’t have the flexibility to change beneficiaries, change terms, or access the assets after transfer. Assets in an irrevocable trust are also better protected.
Which Type of Trust Is Right For You?
Both revocable and irrevocable trusts have their own downfalls and benefits. What are your priorities?
If full control is your priority, you should choose a revocable trust. If you fear your beneficiaries may become estranged and you may want to change them, choose a revocable trust. If you want to have the option to liquidate your assets to cover unexpected expenses, choose a revocable trust.
If you have creditors or you are being sued, choose an irrevocable trust. If you have concerns about taxes, choose an irrevocable trust. If you are worried about paying for long-term care, choose an irrevocable trust.
If you need more guidance on these matters or if you’ve already decided what kind of trust you want and just need help creating it, we are here for you. Consult Attorney J. Kevin Tharpe for clarity on this and many other estate planning matters. We can’t wait to offer you our guidance!