Both revocable and irrevocable trusts are excellent estate planning tools. Each is beneficial in different situations.
When planning your estate, consider your objective in creating the trust to determine which option works for you.
Washington State Health Care Authority defines an irrevocable trust as one neither the grantor nor the beneficiary can change. These trusts permanently remove assets from the grantor’s estate. An irrevocable trust is beneficial for the following reasons.
- Property in an irrevocable trust is safe from estate tax because the assets do not belong to the grantor
- Money in the trust does not count as an asset when qualifying for government-funded medical insurance
- Irrevocable trusts protect assets from collection activity by creditors or lawsuits
While these benefits provide asset protection, irrevocable trusts require you to give up control and ownership of your property.
If you do not want to give up your assets, a revocable trust might work better for you. With a revocable trust, you maintain ownership of your property and can make changes to the trust at any time. Modifications may include:
- Naming the trustee
- Adding or removing beneficiaries
- Including or withdrawing assets
Additionally, revocable trusts ensure your beneficiaries receive their inheritance without the need for probate. Keep in mind, though, that creditors do have access to your assets since you retain ownership. If you have a lot of debt or are at risk of lawsuits, you may want to consider a different type of trust.
Protecting your property in either a revocable or irrevocable trust ensures your assets go to your beneficiaries as you intend.