Estate planning can feel like a maze of legal terms and difficult decisions. However, if you are reading this, you have already taken the first step: asking the right questions. One of the most common decisions people make when creating an estate plan in Wisconsin is whether to set up a revocable or irrevocable trust.
At first glance, they may sound similar. However, in practice, there are several differences, and understanding them can help you build an estate plan that actually meets your needs.
Let’s take a closer look at revocable vs irrevocable in Wisconsin. We will discover what’s the difference so you know which one might be the better fit for your goals.
What Is a Revocable Trust?
A revocable trust is also known as a “living trust.” It can adapt as your life changes. You can modify, update, or cancel it entirely during your lifetime.
In most situations, you are the trustee while alive. You can stay in control of everything: your home, bank accounts, and investments. With that, you can move assets, change beneficiaries, and rewrite the terms.
There are a few benefits to choosing a revocable trust. These include:
- Full control: You stay in charge of your assets and can make changes anytime.
- Probate avoidance: When you pass away, your assets can go directly to your beneficiaries without going through the court system.
- Privacy: Unlike a will, a trust keeps your estate details from the public record.
- Ease of management: If you become incapacitated, a successor trustee can step in and manage things without court involvement.
There is a drawback. While you still own and control the assets, they are not protected from creditors, lawsuits, or long-term care costs. If you’re concerned about nursing home expenses or asset protection, a revocable trust cannot shield them.
What Is an Irrevocable Trust?
On the other end, you have an irrevocable trust. This is a more permanent and protective option. Once you create and fund this trust, you are handing over control. Unlike a revocable trust, you cannot revoke it or make changes without the trustee’s or beneficiaries’ consent.
One of the biggest benefits of trust is asset protection. Once they are in an irrevocable trust, they are no longer considered yours for legal and financial purposes. That can help with asset protection, tax planning, and Medicaid eligibility.
Here is a breakdown of these advantages:
- Medicaid planning: Transferring assets to an irrevocable trust ahead of the five-year look-back period can help you qualify for Medicaid without spending down your entire estate.
- Asset protection: These trusts can shield your assets from lawsuits and creditors.
- Estate tax reduction: For larger estates, irrevocable trusts can help reduce tax liability.
- Special needs planning: They are used to provide for a loved one without affecting government benefits.
Unfortunately, there are trade-offs. You give up access and control. The assets in the trust are managed by a trustee. Plus, you cannot use them for personal benefit unless the trust is carefully structured to allow it.
How Can You Choose?
If your main goals are avoiding probate, staying flexible, and controlling your assets, a revocable trust might be your best bet. It is a great starting point for many families, especially those who want to keep things simple.
But if you are considering long-term care costs, protecting your home from Medicaid recovery, or ensuring your life’s work is shielded from creditors, an irrevocable trust could be the stronger tool.
Sometimes, the answer is not one or the other; it could be both. Many Wisconsin residents use a combination of trusts to give some flexibility with their assets. You will want to work with an experienced estate planning attorney to choose the right option before you establish any of these trusts.
Don’t Make This Decision Alone
There are plenty of differences when you compare revocable vs. irrevocable trusts in Wisconsin. Setting up a trust is more than just filling out paperwork. This is a personal, strategic decision that affects your family, your finances, and your future. You will want to talk with an experienced estate planning attorney who can help you make the best decision for you and your family.
If you want to set up a Wisconsin trust or have questions about any part of the process, the Collins Law Firm provides estate planning, estate administration, business law, and elder law services. Contact us or call (414)-207-6292. Schedule your free and confidential consultation today!