It is important that you understand the differences between a revocable vs. irrevocable trust if you are considering including a trust in your estate plan. Trusts can be a powerful legal tool when used properly, but the right kind of trust must be chosen to meet your specific needs. Unsworth LaPlante, PLLC can provide you with guidance on the different types of trusts so you can select the right one.
Once you have made the decision to create a revocable or an irrevocable trust, you also need to follow all legal formalities for creating a trust. Our legal team can assist you so you can rest assured your trust will be legally valid and provide the protections that you were planning on. To learn more about how we can assist you with all aspects of trust creation, give us a call today.
Revocable vs. Irrevocable Trust: Key Differences
A revocable trust and an irrevocable trust both involve the creation of a trust document, the naming of a trustee, and the selection of beneficiaries. Both kinds of trusts need to be funded by transferring assets into the trust.
However, there are some major differences between how the trusts work. A revocable trust can provide some protection for assets, but not in the same way that an irrevocable trust does.On the other hand, an irrevocable trust requires giving up a lot more control over trust assets.
When you create a revocable trust, or a living trust as it is also called, you can serve as trustee, while naming a backup trustee in case something should happen to you. You can maintain control over the assets in your trust and can make any changes you want to at any time, including revoking the trust.
Since you still are in substantial control over the trust assets, the trust assets can still count as resources if you are trying to qualify for Medicaid to pay for your nursing home care. If creditors make claims against you, the assets in your revocable trust may not necessarily be safe. And, although the assets do transfer through trust administration instead of through the probate process, the assets in the irrevocable trust will still count as part of your estate when a determination is made on estate taxes.
An irrevocable trust can provide more protection for your wealth because, if properly created, the assets held within the irrevocable trust should not count for Medicaid qualification and may be beyond the reach of creditors. In order for your irrevocable trust to provide the protections you are hoping for, you need to give up control over trust assets to be managed by the trustee. You will be limited in how you can access the assets and in what you can do to modify the irrevocable trust. Your attorney can explain how much control you must abdicate so you can make an informed choice on whether the asset protection is worth it to give up so much control over your wealth.
What Type of Trust is Right for You?
Deciding between a revocable vs. irrevocable trust is difficult because you must weigh the pros and cons. If you want more flexibility but less protection for assets in case of creditor claims and nursing home care, then a revocable trust may be your better bet. If your goal is to keep your wealth as safe as possible and you don’t mind giving up much more control, then you should think about an irrevocable trust.
You also need to talk with your attorney if you may need a specific type of trust, like a special needs trust to protect access to means-tested benefits for a disabled child or a spendthrift trust to ensure that an irresponsible heir does not squander an inheritance. Your lawyer can explain to you what the rules are for that specific trust type and can assist you with creating a trust document that establishes the trust you need to create.
Getting Help from A Vermont Trust Lawyer
Unsworth LaPlante, PLLC can help you to determine what kind of trust is the best trust to meet your needs. Our legal team will explain, in detail, the differences between a revocable vs. irrevocable trust and will help you decide which trust will best accomplish your specific goals. We’ll also guide you through the process of creating and funding your trust so you can benefit from the expected protections for your family and assets.
To find out more about different kinds of trusts you can create, join us for a free seminar. You can also give us a call at (802) 879-7133 or contact us online to get personalized advice on trust creation from a Vermont trust lawyer.