When it comes to Estate Planning, Trusts are excellent tools that you can use to protect your assets. Revocable and Irrevocable Trusts serve distinct purposes, and it is important to understand the differences between them.ย 

Revocable Trusts allow you to retain control over the Trust assets during your lifetime. You reserve the right to modify, amend, or even revoke the Trust entirely if you wish to do so. This flexibility makes Revocable Trusts an attractive option for many individuals.

Pros of Revocable Trusts:

    1. Control. During your lifetime, you can make any changes to the Trust’s terms you want: adding or removing assets, changing beneficiaries, or appointing new Trustees. This adaptability allows you to adjust your planning based on circumstances.
    2. Probate Avoidance. Upon your passing, the assets held in the Trust can be distributed to beneficiaries without the need for court involvement, ensuring privacy and saving time and expenses.
    3. Incapacity. Revocable Trusts give your loved ones the opportunity to manage your assets in the event you lose mental capacity. If you become unable to handle your affairs, the successor Trustee can step in and manage assets on your behalf.
    4. Privacy. Unlike Wills, which become public record during probate proceedings, Revocable Trusts maintain privacy.ย 

Irrevocable Trusts cannot be modified or revoked by the Grantor once they are established, except under specific circumstances. Once assets are transferred to an Irrevocable Trust, they are no longer considered your property.

Pros of Irrevocable Trusts:

    1. Medicaid Planning: For those concerned about long-term care costs, Irrevocable Trusts can be utilized for Medicaid planning. By transferring assets to an Irrevocable Trust well in advance, you may be able to qualify for Medicaid benefits while preserving your assets for your loved ones.
    2. Asset Protection: By removing assets from your estate, you can better protect them from creditors, legal judgments, or other potential threats. Because you no longer own the assets, they are shielded from personal liability.
    3. Estate Tax Planning: Irrevocable Trusts can be effective tools for estate tax planning. Although the Estate Tax floor currently does not apply to most families, we expect this to be a much more relevant concern in the coming years.
    4. Charitable Giving. Irrevocable Trusts allow individuals to establish Charitable Trusts, where assets are set aside for a specific charitable purpose. This enables philanthropic endeavors and may provide tax benefits to the Grantor.

It is important to note that establishing an Irrevocable Trust requires careful consideration and professional guidance due to the loss of control and the irrevocability of the arrangement.

Please call us at 301-696-0567 or self-schedule at lenaclarklegal.com if you would like to help protect your assets and loved ones in the event of death or disability.