You’ve probably heard you need a trust to keep your family out of court and maybe out of conflict in the event of your death or incapacity. And, if you own any assets in your name at the time of your incapacity or death, without the right legal documents, your family must go to court for permission to access them. While you may under this, you still need clarification about whether you need a revocable or irrevocable trust. Since more and more, people are coming our way asking for an irrevocable trust, this article is designed to help you learn the difference between these types of trusts so you can be prepared to discuss your options.
What Is A Revocable Trust?
A trust is an agreement between the Grantor of the trust (that’s you) who retitles your assets to your trust, with a Trustee (someone named by you) to manage assets now in your trust for the beneficiaries (whoever you name to receive your assets).
With a Revocable Living Trust (RLT), prepared for your use during your lifetime and after your passing, you will be the “Grantor,” the “Trustee,” and the “Beneficiary.” And you can put your assets in, take them out or change the trust terms any time as long as you are alive and well. With an RLT, once you become incapacitated or in the event of your death, the trust becomes irrevocable, and the person or persons you’ve named as the next trustee in charge (Successor Trustee), steps in to control and distribute the assets held in the trust. If you are still living but incapacitated, you would remain as the Beneficiary. If you pass away, then the Trustee distributes what is left in the trust to the Beneficiaries. At that point, assets can pass outright to your Beneficiaries or be held in continuing trust for them -- protected from creditors, future divorces, future lawsuits, and even estate taxes (if the trust is drafted properly) – if your trust terms provide for continuing protection.
What Is An Irrevocable Trust?
Now, let’s clarify what an Irrevocable Trust is and where it might fit into your plan. An Irrevocable Trust is also an agreement between a Grantor and Trustee to hold the property for a Beneficiary. But, since the trust is irrevocable, it cannot be changed. There are some exceptions to this, but for the most part, that is the case. If you put your assets into an Irrevocable Trust, you cannot then take them out of the trust and return them to yourself because the transfer of your assets to the trust is irrevocable.
An Irrevocable Trust can remove assets from your individual name and protect them from future lawsuits or future growth in your estate, which removes them from your estate for estate tax purposes. We will recommend Irrevocable Trusts when we are preparing your estate for the potentiality of needing long-term nursing care that you would like covered by Medicaid to preserve your family’s inheritance, without spending all of it on your care, or on the other end of the spectrum, if you have an estate that could be subject to estate tax or that could be at risk of lawsuits.
Never choose a type of trust without working with a lawyer who understands you, your family, your assets, and your goals. When you meet with us for our Planning and Design Session, we’ll look at your assets, family dynamics, personal desires, and how the law will apply to all of it. Then, together, we will decide on the right plan for you -- whether to include a trust or not, whether that trust should be revocable or not, and how long it should last for the people you love. Contact us today to get started: 718-514-7575 or 732-333-1854.
Monet Binder, Esq., has her practice in Queens, dedicated to protecting families, their legacies, and values. All halachic documents are approved by the Bais Havaad Halacha Center in Lakewood, under the direction of Rabbi Dovid Grossman and the guidance of Harav Shmuel Kaminetsky, shlita, as well as other leading halachic authorities. To learn more about how a power of attorney can help you, you can send her an email at This email address is being protected from spambots. You need JavaScript enabled to view it. or call 718-514-7575.
