Remember that a Revocable Living Trust is like a door or an open box; things can come both in and out. The next type of trust that I want to explain is the Irrevocable Living Trust (IRLT).
The irrevocable living trust differs from the revocable living trust (RLT) because once something is put into the IRLT, it is permanently there. Imagine that instead of a door that can be opened in an RLT, an IRLT is like a door that has been permanently locked. If you decide to put all of your assets in an irrevocable living trust and you need to get to them one day, you will have a big problem. Another way of putting it is is that it is like a box that can be locked.
You’re probably asking yourself “well, why would anyone want to use an irrevocable living trust then?” The truth is, an IRLT is commonly used because it has asset protection, while an RLT does not. So, since many of us want some control over our assets, IRLTs and RLTs are generally created to work simultaneously.
One example of a commonly used IRLT is a Medicaid Asset Protection Trust (MAPT). This special type of trust is used by people who need or will need to pay nursing home costs, but want to protect some their assets from being spent-down. In order to utilize this type of trust though, you must have enough money to potentially private-pay for long-term care during the entire 5-year penalty period. But sometimes, you can use this strategy and not have to be able to private pay for 5 years!
Stay tuned to explore more options.
-Anthony B. Ferraro