Understanding Revocable Vs. Irrevocable Trusts For Estate Planning In New Jersey And New York

At Asterita & Associates, LLC, we assist New Jersey And New York clients with creating customized trust documents tailored to their specific needs.

Our lawyers understand trust law and the importance of properly structured legal instruments that can achieve a variety of estate planning goals.

What Are Revocable and Irrevocable Trusts?

There are many kids of Revocable and Irrevocable trusts, which can serve a variety of purposes. Revocable trusts or living trusts, offer flexibility, allowing you to control and modify assets during your lifetime. They help avoid probate and provide privacy, they offer no tax benefits. Irrevocable trusts, on the other hand, generally cannot be modified once established, and assets are permanently transferred out of the estate. This can provide significant estate tax advantages and creditor protection, but the trade-off is losing direct control over the assets.

How Do Revocable And Irrevocable Trusts Compare?

Understanding the key differences between these trust types helps you select the most appropriate structure for your estate planning objectives.

Revocable trusts allow complete grantor control, while irrevocable trusts transfer control to third party trustees
Revocable trusts can be easily modified, while irrevocable trusts are difficult to change
Irrevocable trusts can protect assets from creditors, while revocable trusts generally provide little or no protection from creditors
Irrevocable trusts can provide estate tax reduction, while revocable trusts generally do not

These key differences make each trust type suitable for different estate planning strategies and financial situations.

Frequently Asked Questions

Common questions about trust planning help clarify important distinctions between revocable and irrevocable trust structures.

What is the five-year rule for irrevocable trusts?

The five-year rule requires that assets transferred to an irrevocable trust must remain in the trust for five years before they are excluded from disqualification for Medicaid eligibility when applying for full time institutional care. Transfers of assets within five years may result in penalty periods affecting Medicaid eligibility.

Who owns the house in an irrevocable trust?

The irrevocable trust owns the house, not the grantor who transferred it. The grantor gives up legal ownership when placing property in an irrevocable trust, though they may retain certain limited rights.

What happens to an irrevocable trust when the grantor dies?

The irrevocable trust continues operating according to its terms after the grantor’s death. Generally trust assets are distributed to beneficiaries as specified in the trust document, managed by the successor trustee.

Contact Our Estate Planning Team

To discuss creating or updating trust documents, contact Asterita & Associates, LLC, at 732-993-7281 or through our online contact form to schedule a consultation with our experienced estate planning attorneys in New Jersey or New York.