Revocable or “living” trusts allow the person creating the trust, often called a trustor, creator, settlor, grantor, founder, or donor, complete control over the trust. The trustor may change, revoke, or terminate the trust at any time and take back the funds the trustor put in the trust. Revocable trusts are generally used for asset management, probate avoidance, and tax planning. These trusts can be very useful in allowing a trustor to reap the benefits of a trust while maintaining the power to change it at any time before death.
Irrevocable trusts cannot be changed after they are created. Any assets transferred to the trust may only be used or distributed by the trustee as dictated by the terms of the trust document. As an example, a trustor may set up a trust under which the trustor will receive income but prevents any other access to trust assets. This type of trust is often used for protection from creditors or as part of a “spend down” in Medicaid planning to lower a person’s assets to the point at which they become Medicaid eligible.
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