5 Differences Between Revocable and Irrevocable Trusts
Cincinnati trust lawyers provide assistance with the creation of trusts. There are different kinds of trusts, so it is important to make sure that you work with an experienced attorney to find out which type of trust is the right one for you to create. The selection of which trust type is right for you will depend upon many factors including your goals for creating a trust. Zimmer Law Firm will discuss your reasons for trust creation and will provide you with advice on which trust is best for you. Our firm will also provide assistance with the creation of a legally valid trust so you can benefit from the protections that you expect the trust to provide.
As you make a decision on trust creation with the help of Cincinnati trust lawyers, you will need to understand the key differences between revocable trusts and irrevocable trusts, as these two main types of trusts have very different advantages and disadvantages. In fact, here are five of the big differences between an irrevocable trust and a revocable trust.
Revocable Trusts Provide More Control
When you create a revocable trust, you can name yourself as the trustee. You can keep control over the assets held within the trust so you get to decide how those assets are managed. You name a backup or successor trustee who will take over when something happens to you – which is why an irrevocable trust provides you with protection in case of incapacity – but you are able to keep control over the management of your own trust assets as long as you are alive and physically able to manage. With an irrevocable trust, you have to give up a lot of control.
Revocable Trusts Provide More Flexibility
When you make a revocable trust, you can decide if you want to modify the trust or end the trust. You have much more flexibility to change your plans and to make different decisions about what should happen to the trust assets. When you create an irrevocable trust, on the other hand, the trust is, by definition, irrevocable.
Revocable Trusts Don’t Protect Against Estate Tax
Many people believe that because they create a revocable trust and the trust assets pass outside of the probate process that they will not have to worry about estate tax being charged on their estate. This isn’t true. Although one of the benefits of a revocable trust is that the assets transfer through trust administration, which is quicker than the probate process, the assets held within the trust are still considered to be a part of your taxable estate. This means if your estate is large enough, it may be necessary for taxes to be paid out of estate assets after death. With an irrevocable trust, as long as certain requirements are met, it is typically possible to avoid having the assets held within the trust count as a part of your taxable estate.
Assets in Revocable Trusts Are Counted When Determining Medicaid Eligibility
With the flexibility that a revocable trust provides comes a big downside: you have continued control over the assets held within the trust so those assets are still considered countable resources when an assessment is made as to whether or not you can qualify for means-tested Medicaid benefits. This is a big deal because Medicaid is often the only source of outside payments for nursing home care. If you cannot qualify for Medicaid and you need some type of long term care, you could end up having to pay privately. If you create an irrevocable trust, on the other hand, you can structure your trust to give up control over the assets and not have them count as resources. This means it can become possible for you to qualify for Medicaid when you need it, while protecting your wealth.
Assets in Revocable Trusts Are Vulnerable to Losses from Creditor Claims
The same issue of continued control also exists when it comes to claims that creditors make against you. Because you still have access to the assets in a revocable trust, the assets are vulnerable to being lost. A properly structured irrevocable trust, on the other hand, could help you to keep your wealth safe.
Getting Help from Cincinnati Trust Lawyers
To find out more about the key differences between a revocable trust and an irrevocable trust, call Zimmer Law Firm today. Our legal team can provide you with personalized advice on what type of trust is right for you and can help you to create the best trust for your situation. To find out more, join us for a free seminar or give us a call at 513.721.1513 today.