Though many people cockily believe estate planning is just a matter of creating a will and they don’t need any help, there are actually many different estate planning tools at your disposal, which an estate planning attorney can help you navigate. In today’s blog posts, we’re taking a look at two different types of trust that people often mix up: revocable trusts and irrevocable trusts. We’ll help you understand the difference and get a better idea of which one might be the right fit for you.
Irrevocable Trust Basics
Once you create an irrevocable trust, you cannot go back and change it. Once assets are transferred into the trust, you forfeit your power to get them back. You cannot revoke (or go back on) your decision. You also cannot change the beneficiaries or the terms.
So why would you want to create an irrevocable trust? Because what they lack in flexibility, they make up for in protection.
Revocable Trust Basics
After you create a revocable trust, you can change or even undo (revoke) it as you see fit. As the trustee, you are still considered the owner of the assets in a revocable trust. The flip side of the coin is that this also means your creditors can seize the assets in a revocable trust if you fail to pay a debt, and it also counts against you when you are trying to qualify for Medicaid.
Revocable trusts have more flexibility than irrevocable trusts, but lack the protections.
How to Decide Which is Right for You
If you’re trying to choose between creating a revocable trust or an irrevocable trust, you’ll have to really consider your priorities, your goals and your unique circumstances.
Do you feel it’s possible you could change your mind about your choice of beneficiaries? Do you want to be able to liquidate your assets in case of emergencies? If so, a revocable trust is probably a better fit.
Do you want to protect your assets from substantial debts that you might not be able to repay? Are you certain about who you want to pass your assets down to after you’re gone? Are you looking for ways to spend down your assets to qualify for Medicaid when you get older? In these cases, you’d likely lean towards an irrevocable trust.
Many people may answer yes to questions in both of these categories. If that’s you, or you have other concerns or questions, the Matus Law Group team is here for you. We can help you look at your options to create an estate plan that’s perfectly suited to your unique circumstances. Contact us today by calling (732) 281-0060.