Once you have decided to establish a Living Special Needs Trust, you must also decide whether or not this trust will be revocable or irrevocable. There are benefits and drawbacks of each type of trust, and you must carefully consider your family’s circumstances before making a decision.
With a Revocable Trust, you retain the right to add or subtract assets to the trust at any time. This gives you a great degree of flexibility, as you can manage the trust according to your family’s changing life circumstances. If you choose this type of trust, it is important to know that the government considers the assets in the trust part of your estate. If you die, everything in your trust will be included in your estate for tax purposes and may be subject to lawsuits. That means that if someone attempts to sue you after your death, the assets in your trust are susceptible.
An Irrevocable Trust, on the other hand, is separate from your estate, and you cannot remove the assets you place in it. These assets will remain in the trust solely for the benefit of the person with disabilities. Even if you need these assets due to a personal situation, you cannot draw on them. While this may be considered a drawback, irrevocable trusts do have their benefits. For one, any assets that you place in the trust cannot be touched by your creditors for outstanding debts or taxes. In addition, the trust cannot be touched by any creditors of the person with the disability.