Attorney Thomas B. Burton answers the following question:
"Which is Better, Revocable or Irrevocable Trust?"
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I'm Attorney Thomas Burton and today's question is the following:
“Which is better, revocable or irrevocable trust?”
So the answer to this question is, it depends. It really depends on what you're looking to do with your trust, whether you want the revocable or irrevocable trust. An easy way to think about it is this, revocable trusts are changeable during your life. So they are the most common type of trust we use as what we call a will substitute. We use a revocable trust to avoid probate upon all your assets upon death and avoid the time delay in expanse of a court-ordered probate process.
Now, an irrevocable trust can do the same thing - avoid probate but we generally use irrevocable trust for asset protection. When we put an asset in an irrevocable trust, we're saying we can no longer change the trust, essentially that asset is no longer ours. It's owned by the trust and the asset must be administered according to the rules we wrote in the trust, usually by an independent third party trustee, someone you choose to be trustee, not yourself.
So we use irrevocable trust for asset protection. You can think about protection from creditors, nursing homes, the state of Wisconsin Medicaid Program Etc. And the other situation you'll see an irrevocable trust use is for estate tax planning. Now, these are used less for that outside of the very wealthy, if you have under $11.2 million per individual, you probably aren't going to look at this type of trust in terms of being worried about estate tax, but they are very, helpful the irrevocable trust, for asset protection.
So again, think of it this way, not which is better but what type of planning I'm trying to do. If I want to avoid probate, have privacy upon death, provide for the instance where I may need a court ordered guardianship instead of a guardianship. I have a trust in place. The best option is a revocable living trust. If you want to add asset protection, creditor protection, long-term nursing home care planning, then you're going to want to look at an irrevocable trust and talk with your lawyer about the type of planning you want to do, so they can put together the right type of trust for you. At my office, we use both types of trusts. Sometimes together, sometimes alone. It depends on your specific situation.
If you want to learn more about these types of trusts, I have two free guides on my website - one is about a will versus trust and that walks you through what a revocable living trust is used for and the other one is a free guide on how to protect your home from the nursing home that talks more about asset protection trust. I'll put the link to those guides in this video. You can check them out and be sure to check out my other videos on the channel where I talk in depth about a lot more of these issues.
So great question and thank you for asking.
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