At ElderLawLexington | McClelland & Associates, we take time to carefully explain the elements of a solid estate plan. Unlike a revocable living trust, an irrevocable trust is created and enforceable while the creator is still living and cannot be revoked once it is signed.
A revocable trust can be changed or destroyed by the person who creates a trust and an irrevocable trust cannot. When you create a revocable trust, you can freely change the beneficiaries and move property, assets and money in and out of the trust as you wish. On the other hand, when you create an irrevocable trust, you no longer have legal title of ownership to the property in the irrevocable trust, you simply have a legal interest in the ownership and the trustee, a third party that you choose has a fiduciary legal duty to protect the assets of the trust and follow the orders of the written trust agreement. With an irrevocable trust, only the trustee can open the trust and pull money out if they see fit for you or another of your choosing and it is within the fiduciary duty as a trustee. All of the assets placed in an irrevocable trust are removed from your estate, making this a convenient way to keep the value of a large estate beneath the federal estate tax threshold or from Medicaid resource consideration.
One reason for setting up an irrevocable trust is for estate and tax considerations. The benefit of this type of trust for estate assets is that it can remove all incidents of ownership, effectively removing the trust’s assets from the grantor’s taxable estate. The grantor is also relieved of the tax liability on the income generated by the assets.
An irrevocable trust doesn’t always eliminate taxes altogether, but it does set up a taxable entity that is separate and distinct from an estate and may be taxed at a lower rate when all of the assets are included together as part of the estate. An additional benefit to an irrevocable trust is that the assets in the trust are protected from creditors and Medicaid. Unlike wills, irrevocable trusts are private and may not be opened to public scrutiny. The items in the trust are not subject to probate, the same way they would be if you died without a will.
There are numerous types of irrevocable trusts and each type serves a specific purpose. Such trusts are often created to:
Assets held in an irrevocable trust can include:
Setting up an irrevocable trust is technically detailed and labor intensive, so you will need to have a law firm with plenty of experience in this area to handle the paperwork for you. ElderLawLexington is the perfect choice. We will want to make a detailed examination of your entire estate to ascertain whether this is the best estate planning device for your situation. Once assets become part of the irrevocable trust, nothing can be undone without the permission of the trust’s beneficiaries and you will no longer own those assets.
One of our skilled estate planning attorneys at ElderLawLexington can help you decide if an irrevocable trust is right for you.