In estate planning, trusts are used to protect assets and transfer them directly to beneficiaries after your death. Trusts can also be used to avoid the probate process, as well as paying heavy estate taxes. So, which type of trust is right for you? It can be difficult to know without the help of an experienced trust attorney. A revocable trust (usually referred to as a revocable living trust or, simply, a living trust) and an irrevocable trust are the two types of trusts used in estate planning. If you want to make an informed decision for your estate plan, you may want to hire a trust attorney to help you establish and administer your trust.
Revocable Trust
A revocable trust is a trust that can be “revoked” or changed after it is created. With this trust type, the creator, or grantor, of the trust is free to modify its provisions whenever they see fit. They can change the terms governing how trust assets are handled and they can change beneficiaries. Revocable or living trusts are more versatile than irrevocable trusts. However, they also have their own limitations. For example, they cannot be used to protect assets against creditors or for Medicaid eligibility.
Irrevocable Trust
An irrevocable trust means the terms of the trust cannot be revoked or changed after the trust is created. If you forego the option to amend the trust, you will have significantly less control over the trust and its funds. This means once you’ve established beneficiaries, they cannot be changed. If you fall out with a loved one after making them a beneficiary, they remain a beneficiary regardless. Only a minimal number of highly exceptional circumstances would permit the modification of an irrevocable trust. Irrevocable trusts, however, are a good way to protect assets from creditors and allow you to qualify for Medicaid without draining your estate, as long as the trust is established before the 5-year Medicaid lookback period.
Irrevocable Trusts vs. Revocable Trusts: Which Should I Choose?
Both of these come with their advantages. Let’s talk about the pros of each that don’t apply to the other.
A revocable trust can be the best option if you want to maintain control over your estate and the trust funds. For many people, having the flexibility to alter and adjust the trust in the future is advantageous. Your relationships with potential beneficiaries may change over time, so a revocable trust is a good choice for flexibility in naming beneficiaries. Conversely, the property held in an irrevocable trust and any potential future increase in the value of the property are exempt from your taxable estate since you have relinquished control over the property. This results in a lower overall estate tax obligation. Additionally, an irrevocable trust can let the grantor get around the Medicaid income cap. Property that may otherwise be forfeited to creditors can also be safeguarded and preserved via irrevocable trusts. Deciding what type of trust is right for you and your estate plan can be tricky. You can ask an experienced trust attorney at the Law Offices of Brenton C. McWilliams about what choice may work best for you and your family.
Experienced Trust Attorneys
Establishing the right type of trust for your needs can be a daunting process. But at The Law Offices of Brenton C. McWilliams, we specialize in establishing trusts and in trust administration. At our estate planning law firm, experienced estate planning attorneys can help you plan your estate, protect your assets, and give you and your family peace of mind.
Our law office helps families with a myriad of legal services, including these estate planning and related practice areas…
- Will Probate
- Intestate Estate Administration
- Probate Estate Administration
- Summary Distribution
- Last Will & Testament
- Revocable Living Trust
- Power of Attorney
- Health Care Power of Attorney
- Beneficiary Designations
The trusted estate lawyers at The Law Offices of Brenton C. McWilliams have both the knowledge and experience necessary to work with you on all your estate planning needs, including helping you establish the types of trusts you need to protect your estate. For legal services regarding trusts and probate law, schedule a consultation with a qualified estate lawyer at our office today.
Trust Law FAQs
What types of trusts are best for real estate?
Revocable trusts are the most commonly used trusts for transferring real estate and for other aspects of estate planning. Revocable trusts help lower the cost of the probate process and also help protect your privacy after death.
Are trusts public record in Alabama?
Since trusts are not subject to the probate process, they do not become public record under Alabama law. Trusts are a great way to keep your assets and family matters private and avoid public scrutiny. Law firms focusing on estate planning and probate law can help ensure your trusts are established properly so your assets avoid probate.
How does a trust keep my estate out of probate?
Since the assets belong to the trust, not the individual, there is no need for a legal probate process to transfer them. Instead, assets are able to be transferred to the beneficiaries of the trust when the terms of the trust are met.