Justin, I know that my wife and I need a trust to keep our things out of probate court, and I’ve been reading up on my options. I have seen that there are basically two types of trusts, revocable and irrevocable. What is the difference, and how do I know which one is right for us? – Gene
Gene, In a nutshell, a revocable trust can be changed or revoked by the creators of the trust at any time. An irrevocable trust cannot; it is more permanent. Additionally, in most cases, the creators of a revocable trust will also serve as their own trustees, meaning they maintain complete control of their trust. In most cases, the creators of an irrevocable trust do not serve as the trustees of their trust, meaning they must turn over management of the trust to someone else.
Both types of trusts will help you stay out of probate court, but only an irrevocable trust can serve as a shelter for your assets against the high costs of long-term care. Not all irrevocable trusts are drafted for asset protection, but a properly drafted irrevocable trust can serve as a shelter against long-term care costs. Because of the flexibility of revocable trusts, they cannot serve as asset shelters.
When deciding which trust is right for you, you must determine if your desire for flexibility and control outweigh your need to shelter assets from the costs of long-term care. If so, a revocable trust may be better for you. But if asset protection is your highest priority, the irrevocable trust may be more appropriate.