Irrevocable vs. Revocable Trusts: Which One Should You Choose to Protect Your Assets?
If you're planning your estate, you've likely heard about the benefits of trusts. Trusts are a popular estate planning tool that can help you protect your assets, minimize taxes, and avoid probate. However, choosing the right type of trust can be confusing.
An irrevocable trust is a type of trust that cannot be changed or revoked once it has been created. The assets you transfer to an irrevocable trust are no longer considered part of your estate, and you no longer control them. This means that creditors, including Medicaid, cannot touch the assets in the trust. Additionally, the assets in an irrevocable trust are not subject to estate taxes, which can save your heirs a significant amount of money.
A common use for an irrevocable trust is to protect assets from long-term care costs. By placing assets in an irrevocable trust, you can qualify for Medicaid earlier and avoid having to spend down your assets on long-term care expenses.
A revocable trust, on the other hand, can be changed or revoked at any time during your lifetime. You retain control over the assets in the trust, and they are still considered part of your estate. This means that creditors can still go after the assets in the trust, and they are subject to estate taxes.
A revocable trust is a popular estate planning tool because it allows you to avoid probate. Probate is the legal process of administering your estate after your death, and it can be time-consuming and expensive. Assets in a revocable trust do not go through probate, which can save your heirs time and money.
Which One Should You Choose?
The choice between an irrevocable and revocable trust depends on your goals and circumstances. If you want to protect your assets from long-term care costs or estate taxes, an irrevocable trust may be the better option. However, if you want to avoid probate and retain control over your assets, a revocable trust may be the way to go.
It's important to note that creating a trust is a complex process that requires the help of an experienced estate planning attorney. At Hedstrom Law, P.A., we can help you determine which type of trust is right for you and guide you through the process of creating and funding your trust.
In conclusion, choosing between an irrevocable and revocable trust is an important decision that should be made with the help of an experienced attorney.
If you're interested in protecting your assets and minimizing taxes, contact Hedstrom Law, P.A. today to schedule a consultation.