When you think about the financial decisions that you have made throughout your life, you recognize the fact that you have had many options. You weigh all of the factors when you make an important financial decision, and you go forward in a fully informed manner.
This type of logic should apply to estate planning as well. Each family is different, and everyone is in a different financial situation. There are many different approaches that can be taken, and you should be fully apprised of all of your options.
With this in mind, let’s look at the distinctions between revocable trusts, and irrevocable trusts.
Incidents of Ownership
It doesn’t take an estate planning expert to recognize the fact that you must be able to revoke or dissolve a revocable living trust. Indeed, if you have this type of trust, you have the power of revocation. You can dissolve the trust entirely, and you would be able to take back direct personal possession of assets that you conveyed into it.
This arrangement can be comforting, but you are retaining incidents of ownership, so this type of trust would not provide certain benefits that you would gain if you were to use an irrevocable trust.
Sometimes, you would benefit if you were to create legal separation between your personal identity and certain assets that are in your possession. This can be done through the utilization of certain types irrevocable trusts.
Asset protection would be one objective. If you are concerned about potential lawsuits, you could convey assets into an irrevocable asset protection trust. There are also irrevocable trusts that are used by people who are exposed to the federal estate tax. Assets in these trusts would not be part of your estate for tax purposes.
The Medi-Cal program is important to many senior citizens, because it will pay for long-term care. Medicare does not pay for living assistance. Since Medi-Cal is only available to people with very limited assets, you could convey assets into an irrevocable Medi-Cal trust so that you could obtain eligibility.
These are a few examples, but there are other estate planning objectives that can be accomplished through the utilization of irrevocable trusts.
If you are not concerned about the above scenarios, you may want to use a revocable living trust to facilitate efficient asset transfers after you die. The trustee that you name would be able to distribute assets to the beneficiaries outside of probate.
On the other hand, if you use a will instead of a living trust, it would be admitted to probate after your passing. This process is time-consuming, and the heirs do not receive their inheritances until it has run its course.
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Our firm offers planning consultations, and you can send us a message through the following link if you would like to discuss your estate planning goals with an experienced and qualified estate planning and elder law attorney: Sacramento CA Estate Planning Attorneys.