The two basic types of trusts are a revocable trust, also known as a revocable living trust or simply a living trust, and an irrevocable trust. The owner of a revocable trust can change its conditions at any time. You can include a statement in the trust to the effect that it cannot be changed or revoked. This makes it an irrevocable living trust.
However, the law allows even irrevocable trusts to be modified or revoked under certain circumstances. A revocable trust is also called a living trust. It's a legal document that you create that allows you to separate the ownership of your property from the control of your property. This is useful to facilitate the transfer of assets after your death and to ensure that your assets can be managed should you become incapacitated.
Both revocable and irrevocable trusts have important benefits, and each of them can play a role in a comprehensive estate plan. An irrevocable trust can be used to reduce personal income and capital gains taxes by transferring them to the trust and leaving them out of you. Both a revocable and an irrevocable trust can help you facilitate the transfer of assets regardless of the legalization of estates. Then, you transfer the legal ownership of your property to the trust and the trust becomes the legal owner.
A revocable trust is a trust that can be revoked, meaning it can be changed or updated at any time, as long as you are still alive and in your right mind. If you want to keep control of your wealth, for obvious reasons, a revocable trust may be the best option. An estate planning lawyer can help you explore different trust options, draft an enforceable trust, and develop a comprehensive plan to protect your loved ones and your estate after your death. An irrevocable trust, on the other hand, requires largely ceding control over the ownership of the trust and the trust cannot be changed under most circumstances.
When creating an active trust, you must place the asset in the trust once the trust document is signed. You create a trust document that specifies who will act as the trustee responsible for managing the trust's assets. The successor trustee will begin to manage the trust assets when you are unable to do so and will facilitate the transfer of trust assets to the beneficiaries after your death, in accordance with your wishes. While most people create active trusts to benefit their families, you can name anyone, including yourself, as a beneficiary.
While revocable trusts don't save you when it comes to income or wealth taxes, irrevocable trusts can help. If you include a paragraph in the trust that says it can be changed or revoked, then it's called a “revocable living trust.” Knowing which one is better, a revocable trust or an irrevocable trust, really just depends on the level of protection you need. And if you follow the right processes (such as creating a trust well in advance), your trust assets may not be considered when determining if you qualify for Medicaid to pay for the care you receive in a nursing home.