What if you change your mind about a trust?

On Behalf of | Mar 22, 2022 | Estate Planning

As you go through life, you may want to change your estate plan. Yet, not everything is changeable.

Irrevocable trusts, as the name suggests, cannot be revoked. In other words, you cannot change them. So, why would you bother using one of these when you could just make a revocable one that you can change?

The freedom to make changes comes at a price

Most things in life involve a trade-off, and trusts are no different. If you want the ability to alter your trust in the future, you need to know what you are sacrificing by opting for a revocable trust:

  • You leave your assets open to federal estate tax: Currently, this tax is only payable on estates worth over $12 million, but that figure is likely to drop considerably. Many suggest it will halve. Assets in a revocable trust do not count as part of your estate.
  • You leave your assets open to Medicaid: You can only get your health expenses paid for through Medicaid if your wealth comes in under their threshold. They operate a look-back period, so you need to protect your money a few years in advance of needing to claim. As you do not know when you might get ill, that is a massive risk with a revocable trust.
  • You forego privacy: When people find out someone has inherited, they may seek to get some of that money. If you plan on leaving a lot to a child, keeping the details private by opting for an irrevocable trust may be better. The court cannot disclose what is in them, but it can if the trust is revocable.

Making the right decisions when estate planning is challenging. There is a lot to learn, and the rules can change. Misunderstanding things could prove costly to you and your family, so be sure to get help to understand more.