Revocable vs. Irrevocable

All right, a revocable trust versus an irrevocable trust. I'm headed to the Destin, Florida airport this afternoon on a rainy Sunday. First, let's talk about the revocable trust. Revocable trust is very, very flexible. It's the most common type of trust that you'll find. The primary purpose of a revocable trust is to avoid probate for your heirs. Just as the name says, a revocable trust can be revoked. Also, you can amend it, change it in any way you want to. And because of that, it does not give any asset protection. In other words, no protection from lawsuits, bankruptcies. The only way to get asset protection through a trust is through some type of an irrevocable trust. Just because the name is irrevocable doesn't mean that it is not revocable. It depends on how your trust is structured. There are two primary reasons why people create irrevocable trust. They either do it for tax purposes or they do it for liability protection, asset protection. If someone has a taxable estate, which as of today when I'm making this video means that as an individual they have an estate over $14 million, or as a couple they have an estate over $28 million, you can take assets out of your estate, put them into an irrevocable trust at the time of your death, will not count against you in terms of the federal estate tax exemption, or if you live in a state where you still have a state, estate tax exemption. For liability protection, a common reason why somebody might do this is a Medicaid asset protection trust. Somebody who wants to make sure that if they need Medicaid benefits at some point in life, their assets are protected from Medicaid. People also create irrevocable trust for purposes of protection from lawsuits or creditors or bankruptcies. Those are done through either a standard type of irrevocable trust or some type of a domestic asset protection trust in the state that allows it, or perhaps an offshore trust. And an offshore trust is excellent for protecting cash, but you need to have a lot of it because they're expensive. There is much more to be said about both, but right now I gotta go catch my flight.