Trusts are one of the most important estate planning tools that you have at your disposal when you sit down to decide how to protect and distribute your assets. They can be split up into two major categories: revocable trusts and irrevocable trusts. In both types, assets are set aside (put into a trust) to be managed by a trustee on behalf of the beneficiaries or beneficiary, but they have differences that make them each better suited to different needs. Let’s take a very brief look!
The Basics of Revocable Trusts
Pros: Control over your assets
Cons: Seizable by creditors, count against you when you try to qualify for Medicaid
If it is important to you to still be able to access the assets in the trust, you will probably need to choose a revocable trust. After a revocable trust is created, you still have the option to make changes to it. You can change the trustee or the beneficiary. You can change the terms. You can even take out assets if you need to use them for yourself. You’re not locked in! With a revocable trust, you are still considered the owner of the assets until you pass away. The downside is that this means creditors may seize the assets if you’re in debt. The assets in a revocable trust also count towards your worth when you’re trying to qualify for Medicaid.
The Basics of Irrevocable Trusts
Pros: Protected from creditors and some taxes, won’t count against you for Medicaid
Cons: You must relinquish control of your assets
After an irrevocable trust has been created, there’s not going back, so it’s important to be confident in your decisions about who will benefit from the trust and who will manage it as trustee. Unfortunately, even if you face a financial emergency, you are not allowed to pull assets out of an irrevocable trust. In exchange, though, the assets are protected from your creditors and from some taxes. They won’t count against when you’re trying to qualify for Medicaid. If these things suit you, irrevocable trusts are a great way to protect assets so your heirs can enjoy them to the fullest extent possible.
Choosing the Right Kind of Trust
As you can see revocable trusts and irrevocable trusts each have their own pros and cons. Choosing which type is right for you will depend on your unique circumstances and goals. The ElDeiry & ElDeiry team is here to help. We can assist you in choosing which tools you need to use in your estate plan, including revocable trusts and irrevocable trusts. If you have questions or if you’re ready to sit down with us to create a plan, please give us a call at (954) 670-2800.
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