What is the difference between a revocable and an irrevocable trust?

What does a Revocable trust do and require from me?

1. Revocable trusts are the primary tool for avoiding probate, including probate across state lines. 
   
   1. While the person setting up the trust usually remains the Trustee and beneficiary, and thus, controls all trust assets, creditor protection is not provided to the person establishing the trust.
   2. However, when trust assets pass to your successor beneficiaries (many times your children), those beneficiaries can be afforded numerous protections from creditors/debt concerns, divorce, disability, drug/substance abuse, and you can plan for a beneficiary's passing, and naming additional beneficiaries, because the trust terms are now irrevocable to them.
2. Because the client retains complete control over the trust, the trust is tied to that person's SSN and there is no change with income taxes or property taxes.
3. Utilizing a revocable trust requires more drafting and leg work than using a Last Will, as we do not simply draft and sign. Instead, the attorney and the client work together to fully fund the trust to hold all the probate assets, and thus, avoid probate.
4. While a revocable trust assists in estate administration during a client's lifetime and can avoid probate, because the client is still the Trustee and beneficiary, and has complete control over her assets, this trust cannot be used for Medicaid planning. 
    

What does an “asset protection”/Irrevocable trust” do and require from me?

1. If long term care, or the “nursing home,” is a concern, then, our focus shifts from customary “estate planning”  to a focus more on 1) assets and asset retention and 2) stage of life concerns and long-term care planning, should the need arise.
2. Because we can draft in a specific manner to reserve the usufruct of the home, we do not disrupt the homestead exemption and property taxes.
3. However, with an irrevocable trust, the client no longer has “control” over his/her estate, and instead, must name a separate Trustee and beneficiary of the trust/estate for the trust to be deemed truly outside that client's estate and where the client is not retaining “incidents of ownership.”  Thus, an irrevocable trust must attain its own EIN/TIN and it pays its own income taxes, on income, if any.
4. Because the client gives up control, if that trust is in existence for 5 years, then, the trust assets are completely protected from any nursing home spend down, or asset recovery, if that need arises.
5. Or, if we cannot get completely through the 5-year look back period for “Medicaid,” and instead, we only make it through 2-3 years, then we plan ahead to address combined income and resources to permit us to private pay for the remaining time frame (we stop the bleeding), get through that lookback period, and then, all assets in the trust are protected.
6. Most often, we use the irrevocable trust with more valuable estates/homes, or where property is more sentimental/desired to be kept in the family.