What is the Difference Between a Revocable Trust and Irrevocable Trust?
March 28th, 2019
When most people think of a trust, they are referring to a traditional revocable living trust, which is a common estate planning technique that is designed to easily transfer assets to the trust’s beneficiaries after death without the hassle and expense of going through probate. Revocable living trusts are extremely difficult, in that the person creating the trust still has full access to the trust assets during his or her lifetime. While revocable trust assets are protected from your beneficiaries’ creditors and new or divorcing spouses, this is not the case for the person who is establishing the trust. If you create a revocable living trust and place your assets in it, your creditors and new or divorcing spouses can have access to those assets during your lifetime.
An irrevocable trust, also called a domestic asset protection trust, is a relatively new type of estate planning mechanism that is available under Michigan law. This type of trust allows Michigan residents to safeguard their assets from creditors during their lifetime. Up until a new state law took effect in 2017, Michigan residents to wanted to establish an irrevocable trust had to travel to one of a handful of other states that permitted irrevocable trusts. Now, a properly created domestic asset protection trust can completely shelter assets from creditors after they have been in the trust for at least two years.
Keep in mind, however, that an irrevocable trust is far less flexible than a traditional revocable living trust. As a result, the irrevocable trust is not for everyone, particularly if you will need to access the assets in the trust during your lifetime. Once you create and fund an irrevocable trust, you typically cannot change it later. However, it does provide full protection for your assets from creditors after the requisite two-year period. If you have a large amount of assets and significant concerns about creditors, then an irrevocable trust may be appropriate for you.
Whether you are interested in executing a revocable trust, an irrevocable trust, or another type of estate plan, we are here to help you explore your options and make the decisions that are best for you and your family. At Legacy Law Center, our goal is to ensure that you have an effective estate plan in place to meet your loved ones’ needs and safeguard all of your assets. We have the skills and knowledge that you need to make the decisions about estate planning for your loved ones. Call your Michigan estate planning attorneys at (734) 995-2383 and schedule an immediate appointment.