The difference between revocable and irrevocable Trusts is pretty simple. One Trust is capable of being reversed, and the other is not. But that answer isn’t usually what my clients are looking for when they ask me this question. What they really want to know is, ‘What type of Trust is right for me?’
Revocable and Irrevocable Trusts are similar. Both types of Trusts act like a legally constructed container (a box) that holds property for the “beneficiary” of the Trust. The beneficiary can be an individual, an institution or a charity.
Revocable Trusts are like an open box. You can put assets into and take assets out of the box. The box is like an alter ego for yourself. You have total control. In contrast, an Irrevocable Trust functions like a closed box. You can put assets into the Irrevocable Trust but give up direct control. Your designated trustee controls the assets inside the Irrevocable Trust, not you.
Revocable Trusts are good at minimizing the Probate process. They are also very good at avoiding or minimizing estate taxes. Revocable Living Trusts are beneficial in many other ways as well. Unfortunately, they are not good at protecting assets against the high cost of nursing home care, a deciding factor for many.
If the costs of nursing home care are a concern, Irrevocable Trusts can help. Irrevocable Trusts are a legal entity separate from the person who creates it. As a “closed box trust” Irrevocable Trusts insulate the assets inside the trust from the cost of nursing home care. However, they must be set up properly and well in advance of nursing home care.
If you’re not sure what kind of Trust is right for you, let’s talk about it. Call or email me to schedule a complimentary estate planning consultation. I will help you put together a plan that fits you and your family.
Marc Guertin is the principal at Marc Guertin, Attorney at Law, LLC in North Haven, Connecticut. Visit AttorneyMarc.com, call 203-500-0201 or email Marc@attorneymarc.com to schedule a complimentary consultation.
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