How Does An Irrevocable Trust Differ From A Revocable Trust?
When dealing with a trust, the term irrevocable means that once set in place, the terms and conditions of the trust cannot be changed, with limited exemption. The reason for this is so that we can protect assets and allow people to get special benefits from the government.
Will a Trust Avoid Probate?
A trust will avoid probate. However, it’s very important that we understand the difference between the trust being created and the trust being funded. Funding the trust is putting your assets in the trust. If we have a home that we want to keep out of probate, we deed the home over to the trust. If we have financial accounts that we want to keep out of probate, we make sure the financial accounts are payable into the trust or the accounts are put in the name of the trust during our lifetime. Once all of these assets are in the trust, then they will absolutely avoid probate. If you do not put those assets in the trust, they will either pass down to designated persons or they will have to go through probate. Then, you will open the door up for the probate court to come in and take charge of those assets and distribute them in a way which may or may not be in keeping with your desires.
Will All Trusts Protect My Assets Equally?
Certain trusts are done for the sole purpose of asset protection and other trusts are done for the sole purpose of probate avoidance. Oftentimes, there’s a combination of the two. Revocable trusts do not protect your assets while you’re alive because the trust is basically your alter ego while you’re living. You have full access to those assets in the trust and they will be countable for such things as Medicaid and they can be attachable for such things as judgments and lawsuits. Irrevocable trusts, with some exception, do protect your assets while you’re living but you can’t take them out while you’re still alive.
If you put $100,000 into your irrevocable trust and you go out and cause a very severe accident 20 minutes later, your $100,000 is protected from any sort of judgment that a lawsuit might bring. If you put the same $100,000 in a revocable trust, it would be attachable by the person who received the judgment against you in the auto accident. After your passing, the assets that are in your revocable trust become irrevocable, so those trusts do have benefits of protecting assets after you have passed.
The irrevocable trust has those benefits after you’ve passed but they also have them while you’re living. The drawback is you aren’t as flexible with the assets in your trust, in terms of taking them out, moving them around, and so forth. Simply because you have a trust doesn’t mean the assets are protected but by taking the right precautions and discussing it with your attorney, regarding what you hope to protect, you can establish a proper trust to protect your assets.
What Is Involved In Trust Administration? Is It Comparable To The Probate Process?
Typically, trust administration is a very simple process. Prior to your death, you’ve created your trust and in that trust you’re going to name a successor trustee. It’ll be the person who’s taking over after you pass away. The successor trustee will step into your shoes for the purposes of managing your estate. They’ll have to gather information and follow your guidelines as to how you wanted your assets handled. Probate, on the other hand, is significantly different. The court determines what’s going to happen with your assets. They’ll determine who the personal representative is going to be, should you not have named one, and they will also determine how your assets are going to be gathered and how they’re going to be distributed.
The probate process becomes quite costly because your probate attorney is going to have to marshal up the assets. The court will charge fees and they will charge taxes on your assets whereas when you have a trustee in place, everything can continue as long as you were acting in your normal life. Administering a trust is far simpler than going through probate.
For more information on Irrevocable Trust Vs. Revocable Trust, a free initial consultation is your next best step. Get the information and legal answers you are seeking by calling (941) 706-0632 today.
Call For A Free Consultation