One of the most common questions presented to Pasadena estate planning attorneys is what’s the primary difference between irrevocable and revocable trust. A living trust is a legal entity that can own assets, such as investment accounts, bank accounts, and real estate. There are many different types of trusts available to people engaging in estate planning, but these are broken down into two primary categorie: revocable and irrevocable.
A revocable trust in Pasadena is also known as a trust that can be changed. Typically the creators is also the trustee and lifetime beneficiary of all income and assets. The creator of the trust can transfer assets inside, spend money inside the trust and add assets to the trust that were previously owned in the individual’s name.
That same person can revoke or amend the trust because these are flexible and changeable. The rules are different with an irrevocable trust, however, because there are rules that limit flexibility for particular reasons. One of the primary reasons has to do with Medicaid planning and trusts that are designed to protect assets from nursing home costs. This is one the major differences between a revocable and irrevocable trust in Pasadena.
Whereas a revocable trust allows the creator or spend the money in the trust and have legal right to that principle amount, there’s no nursing home protection. With a Medicaid asset protection trust, however, the income only rule will prevent your nursing home from taking principle after five or more years have passed. If you have questions about the estate planning process and how to best protect yourself, schedule a consultation with a trust lawyer in Pasadena today.