1) What is the difference between a revocable and irrevocable trust?
Generally speaking, an irrevocable trust cannot be changed or altered once it is executed. Conversely, a revocable trust can be revoked by the grantors at any time. Because of the irrevocable versus revocable characteristics, these two types of trust have different functions as they apply to estate planning and asset protection.
2) What is a living trust?
Living trusts can be thought of as a trust put into place while the individual grantor is alive (living). Living trusts can also refer to both irrevocable or revocable trusts, but generally refer to a revocable trust.
3) What assets can be transferred to the trust?
Generally, with a few exceptions, all assets can be added to the trust as trust property. Assets can include real estate, bank and savings accounts, vehicles, fine art and jewelry, and other valuable items, like mining rights or intellectual property. There are certain assets that cannot be placed in a trust. For example, depending on its status, most IRAs cannot be placed into an irrevocable trust.
4) What are the benefits of a trust?
Both revocable and irrevocable trusts can have certain tax benefits depending on the income level of the grantors. In addition, assets that have been transferred into the trust will not generally fall outside of the grantor’s estate at the time of the grantor’s death, and thus are removed from the probative process. Revocable and irrevocable trusts take the trust property and remove it from assets probated from the grantor’s estate at the time of the grantor’s death.
5) Can I stay in my home if I put it into an irrevocable trust? Will this protect my home against creditors and the nursing home?
The short answer is yes if proper formalities are followed. Trust provisions can be adopted to reflect a grantor’s desire to remain in their home. The ability for grantors to remain in their home can be expressly reserved until time of death or the time they are admitted to the nursing home. One advantage of putting assets, such as your home, into an irrevocable trust is to protect it from creditors and the nursing home. However, this option does come with a five (5) year look back period. It is important to discuss all your options with the attorney.