For many people, estate planning can seem overwhelming. There are so many different types of legal documents and tools available that it can be difficult to know which ones are best in which situations. While legal trusts are among the most commonly used options, there are actually many different types of this document. You can set up either a revocable or an irrevocable trust depending on your needs. Understanding the difference between the two will help you to get started on the right path.
What is a Revocable Trust?
A revocable trust is any living trust that you can make changes to as needed. These trusts are typically used to help you to avoid probate, manage specific assets, and ensure your assets are protected in the event that you become disabled. At any point after you have the trust created, you can adjust any aspect of it to meet your changing needs.
For example, if you create a trust and include financial assets within it, you will need to identify who can make decisions on how those assets are used. Many people will make it so only they can make decisions for the assets in the trust. Over time, however, you may decide that you also want one of your children to have this ability. With a revocable trust, you can easily make that change.
What is an Irrevocable Trust?
As the name implies, an irrevocable trust cannot be revoked or changed once it has been put in place. This makes them a permanent decision, so it obviously needs to be thought through seriously. The benefit of irrevocable trusts is that they can have a variety of great tax advantages, and can also help to segment your estate to protect it from nursing home costs. As long as you know exactly what you want specific assets to be used for, an irrevocable trust is a great option.
For example, if you have a disabled child that you want to provide for after you are gone, an irrevocable trust can be a perfect solution. You can place specific assets into the irrevocable trust that is designated for the care of your child. If you end up having to go into a nursing home at some point, those assets will not be counted when determining if you qualify for Medicaid or Medicare. In addition, if you pass away, the trust will continue to provide for your child as long as the assets are available.
Which is Right for You?
Revocable trusts are much more common, but in certain situations, an irrevocable trust is going to be greatly preferred. The best way to decide which is right for your specific situation is to sit down and talk with an experienced estate planning attorney. Whether you already have an estate plan in place, or this is your first step in that process, we are here to help! Contact Zamora, Hillman & Villavicencio to schedule a consultation today.
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