Justin, I just had a revocable trust drawn up, and I think I understand what it does and why I did it, but after reading the information on your website, I’m curious about the difference between a revocable trust, like I have, and an irrevocable trust. Should I have done an irrevocable trust? – Susan
Susan, I’m glad to hear you’ve taken steps to get your affairs in order. At the most basic level, the difference between a revocable trust and an irrevocable trust is simply your ability to revoke or change the terms of the trust in the future. As the names imply, you can always change, modify, or do away with a revocable trust. That is not true with an irrevocable trust. Both trusts work well to keep your estate out of probate, but if flexibility is one of your top priorities, you probably went the right direction with the revocable trust.
Despite the lack of flexibility that comes with an irrevocable trust, some of my clients choose that type of trust because it does one thing that a revocable trust cannot—it shelters assets from the potential costs of long-term care, such as nursing homes, assisted living, and home caregivers. Assets titled in the name of a revocable trust are not protected from long-term care costs.
But there’s one more thing you should know. If you are doing a trust for long-term care protection, not just any irrevocable trust will do. The rules regarding long-term care benefits require that you not serve as trustee of your own trust or have direct access to income or principal owned by the trust if you hope to use the trust as a shelter against long-term care costs. If protection against long-term care costs is what you have in mind, you must be very careful when setting up your trust.