So, you may be thinking of creating a trust. You may or may not know, but many different types of trusts exist. Revocable, Irrevocable, Asset Protection, Gun, Qualified Income, the list goes on and on. I know, it sounds overwhelming. Before I ever worked in a law firm, I had no idea that there were so many kinds of trusts. Each trust is designed for a specific situation. I am going to explore what each of these mean, what they are designed to do, and how to go about discussing the right choice with an attorney.
Difference Between a Revocable and Irrevocable Trust
Two of the most common types of trusts are Revocable and Irrevocable. The names of these trusts basically give a general distinction between the two. A Revocable trust can be changed, modified, and revoked completely after it is created while an Irrevocable trust cannot be changed, modified, or revoked after it is created. A Revocable trust is often called a living trust for the fact that it is in existence during a person’s lifetime. It helps a person manage assets and affairs in the case of sudden illness, disability, or aging. It is super important to remember that although it can help manage assets, it is not specifically designed to protect them completely from creditors. The assets in a Revocable trust are still subject to creditors’ claims, however, the creditor must petition the court for an order to get to those assets in the trust. It is a more difficult way for creditors to reach those assets, but it does not protect them completely. On the other side, Irrevocable trusts can offer more secure asset protection. For example, you decide to create an Irrevocable trust and to transfer ownership of your property into that trust. Since you no longer own it, the trust does. If you do not own that property, the creditors cannot take it. Remember, every situation is different, and it is best to discuss all of your options with an attorney.
How Do I Protect My Assets?
Many people become concerned with protecting their assets from creditors and avoiding probate as well. To learn more about that topic, read one of our past blog posts located at this link. Now, Asset Protection trusts are a specific type of trust. It is designed to do exactly as the name suggests; it is supposed to protect your assets. Regardless of whether you are being sued, or creditors are looking to be paid out of an estate matter, any assets that are in an Asset Protection trust cannot be accessed nor touched. A lot of planning goes into any trust, however, if you want to ensure your assets are protected as best as possible, it is always important to consult with an attorney and discuss what would go into an Asset Protection trust plan, and if that truly is the best option for you. To read more about asset protection, read this article published on the American Bar Association website.
How Do I Protect Firearms?
Our firm has handled and helped create Gun trusts as well as the ones we have already discussed in this blog. Essentially, a Gun trust helps protect valuable firearms. Firearms can cost a great amount of money, but they can be complicated to deal with in a probate. If there is no Gun trust, there is a risk of losing those assets upon the owner’s death. If you do not surrender the firearms upon a family member’s death, you could be committing a crime. That is why it is important to have a Gun trust established.
Medicaid Planning and Trusts
One type of trust I have not discussed yet is a Qualified Income trust. Our firm works with a Medicaid planning company to help your loved one apply for Medicaid benefits. This can be a challenging process that requires a whole lot of paperwork to be done. Now during this process, there is a certain income cap that one must be at or under in order to qualify for benefits. When an applicant is over that income cap, we use a Qualified Income trust to get them under the limit. The Department of Children and Families has very strict guidelines for how an applicant can qualify for Medicaid. If you are looking at potential Medicaid planning services, take a look at this Qualified Income Trust Information Sheet created by the Department of Children and Families. Also, it includes a link to the list of the current income standards in Florida for Medicaid applicants. This sheet gives a little insight to why we use this type of trust. If you believe you may need help with Medicaid planning, please contact us.
What Do I Do Now?
Now that we have discussed so many different types of trusts, I hope that some of this information has been able to help you see the difference between them. You can read brief descriptions of some of the types we have discussed at the following link on our website. You can also read more about Medicaid and income qualification at the following link on our website. If you are thinking about creating a trust, please contact us to set up a free consultation.
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