Trust Tussle: Navigating the Maze of Revocable vs. Irrevocable Trusts

Planning your financial future? Enter the fascinating world of trusts, where you entrust assets to someone (trustee) for the benefit of yourself or others (beneficiaries). But choosing the right trust requires understanding the nuances, particularly the battle between revocable and irrevocable trusts.

Revocable Trusts:

Think of revocable trusts as your ever-evolving wardrobe. You can add, remove, or change clothes (assets) any time you please. Want to change Trustees? Simply amend the trust. Want to add your new grandchild? Consider it done. 

Pros:

• Ultimate control: You're the fashionista in charge, tweaking your financial outfit as needed.
• Avoids probate: Assets skip the court process, ensuring a smoother transition to beneficiaries.
• Disability protection: A designated successor trustee steps in if you become incapacitated.

Cons:

• No creditor protection: Assets remain vulnerable to lawsuits and debts.
• Tax implications: Your estate still includes the trust assets for tax purposes.

Irrevocable Trusts:

Now for the irrevocable trust, which, unlike a stubborn pair of jeans, cannot be easily returned once donated. Once you form the trust and move assets in, they're out of your taxable estate for good. This could help lower your estate tax bill. But, like a diamond-encrusted pair of heels, they come with a cost: limited control. You can't easily take them back or change beneficiaries.

Pros:

• Asset protection: Shields assets from creditors and lawsuits, offering financial security for your loved ones.
• Tax benefits: Removes assets from your taxable estate, potentially saving your heirs a hefty tax bill.
• Medicaid eligibility: Can help qualify for Medicaid assistance if needed.

Cons:

• Limited control: Once you donate, those assets are out of your hands. Say goodbye to wardrobe swaps.
• Complexities: Setting up and maintaining an irrevocable trust can be intricate, so seek professional guidance.

So, who wins the trust tussle?

Neither! There's no one-size-fits-all answer. The ideal trust depends on your unique goals and situation. Talk to a lawyer to decide which garment fits your financial body best.

Remember:

• Revocable trusts provide flexibility but offer limited asset protection.
• Irrevocable trusts offer significant tax benefits and asset protection but come with limited control.

We Can Help!

We can help you decide which trust is best for your family. The first step in our 3-meeting process is a Peace of Mind Planning Session. We can meet in person or via Zoom. You’ll fill out a questionnaire, and we’ll answer your questions and present your options. We’ll also talk about our unique flat fee pricing. Then, if we decide we are a good fit to work together, we’ll discuss the next steps. This session is normally $275 but mention this blog post and we’ll waive the fee! Book your Peace of Mind Planning Session HERE.