Can you explain, as simply as possible, the difference between a revocable trust and an irrevocable trust. How does the estate lawyer determine which is best for you?
Your goal determines the type of trust you need.
A revocable trust is flexible. You can change its terms and beneficiaries, or revoke it, at any time; and by making yourself the trustee, you control the assets you put into it. Legally, they’re still yours — still subject to your income and estate taxes and the claims of your creditors, and still available to pay for your long-term care.
So what does it accomplish? 1) If you become incapacitated, a co-trustee can easily take over your financial and business affairs. 2) The trust preserves your privacy after your death because unlike a will, it isn’t a public document. 3) Unlike assets left via a will, trust assets avoid probate, passing directly to the trust beneficiaries when you die. But avoiding probate isn’t a big deal for New York residents because in New York probate is a quick, inexpensive process. (And probate isn’t an issue for you if your estate consists of a jointly owned house, jointly owned bank and brokerage accounts, and insurance policies and retirement accounts with named beneficiaries, none of which ever goes through probate.)
By contrast, an irrevocable trust can’t be changed. After you put assets into an irrevocable trust, you no longer own, control or have access to them. Transferring assets into an irrevocable trust can therefore be a way to reduce the size of your taxable estate, to shelter assets designated for your heirs from their creditors, or to help make you eligible for Medicaid by reducing the assets available for your care.
THE BOTTOM LINE The trust you need depends on what you want to accomplish.
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