Different types of trusts are used in the field of estate planning, and they serve varying purposes.
One distinction between trusts is the matter of revocation. There are irrevocable trusts, and there are revocable trusts such as the revocable living trust.
In a general sense, the major difference between the two trusts is somewhat self-explanatory: you can revoke one type of trust, and you cannot revoke the other.
Asset Protection
If you have a revocable living trust, you are called the grantor of the trust. The grantor can serve as the trustee at first, and the grantor can also act as the beneficiary. As the trustee the grantor directs the actions of the trust, and he or she can take monetary distributions.
Because the trust is in fact revocable, the grantor can dissolve or rescind the trust at any time. If the trust was revoked, the grantor would once again assume direct ownership of the property.
The grantor will name a successor trustee and successor beneficiaries when the trust agreement is being created. After the death of the grantor, the successor trustee will distribute assets to the successor beneficiaries in accordance with the instructions left behind in the trust agreement.
Assets that have been conveyed into a revocable living trust would not be protected from legal judgments. After all, the grantor is retaining complete control of the property that has been conveyed into the trust. He or she can dissolve the trust and use the funds to travel around the world. Clearly, the grantor has the ability to satisfy the judgments.
There is also the matter of Medicaid planning. Medicaid will pay for long-term care, but Medicare will not. People sometimes divest themselves of assets in an effort to qualify for Medicaid.
If you were to convey assets into a revocable living trust, they would be counted when Medicaid was tallying your countable assets.
Irrevocable Trusts
A revocable living trust will not protect assets, but there are irrevocable trusts that are utilized for asset protection purposes. You can use an irrevocable trust to protect assets for your own purposes, but you can also use this type of trust to protect assets that you are passing on to your loved ones.
There are also irrevocable trusts that can be created to remove resources from your own name for Medicaid planning purposes.
Download Our Report on Revocable Living Trusts
Revocable living trusts do not provide asset protection, but they are valuable on a number of different levels. If you would like to learn more about revocable living trusts, download our free report.
This report will provide you with a solid foundation of information, and you can obtain access to your copy through this link: Revocable Living Trust Report.
Marianne Flood, Estate Planning Attorney
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