Irrevocable trust are trusts that cannot be changed or ended once they have been put into place. They are an alternative to revocable trusts, which allow for modification and termination if the trust creator (called the “settlor”) needs to make changes.
While irrevocable trust can sometimes allow for small changes regarding beneficiaries and trustees, usually the trusts are set in stone and are not modifiable once the trust has been formally executed by the settlor.
Irrevocable trusts primarily are used for asset protection and estate planning, but those who use this type of trust must know exactly what is involved and what the implications are of creating an irrevocable trust.
For those who wish to take advantage of the benefits an irrevocable trust can provide, it is important to have legal help with the trust creation to ensure everything is done correctly and the trust is appropriately funded with assets.
Parman & Easterday has extensive experience in creating irrevocable trusts. We understand when and how these trusts should be used and can assist you in making sure you make informed and appropriate choices regarding their use. We can guide you through the trust creation process so your trust will be valid and provide the benefits you expect. Give us a call today at (405) 703-9987 to find out more about irrevocable trust benefits and using trusts to protect yourself, your family, and your assets.
Benefits of Irrevocable Trusts
Irrevocable trusts offer substantial benefits. Some different advantages associated with irrevocable trusts include:
- Asset protection. Irrevocable trusts can provide protection for trust assets from creditor claims. The assets in the trust may also be kept safe if you need to go into a nursing home and want Medicaid to pay for your nursing home care. Normally, assets would have to be spent down before Medicaid would provide coverage, but assets in an irrevocable trust should not count as disqualifying resources for the needs-based Medicaid program.
- Reducing or avoiding estate taxes. With larger estates, estate taxes can be assessed and reduce the value of the estate. Transferring assets into irrevocable trusts can reduce the taxable estate and reduce or avoid estate taxes.
- Continued control: When you create an irrevocable trust, you can continue to manage and control the assets held within it. Although you don’t have access to the trust assets for your personal benefit, you can establish the conditions on when and how the wealth held within the trust can be used.
Not every trust provides these benefits, and trusts must be created in accordance with legal formalities in order for them to provide these advantages to you. This is why it is so important to get legal help with irrevocable trusts, revocable trusts and other estate planning tools.
Should You Create an Irrevocable Trust?
Deciding whether to create an irrevocable trust can be complicated. You need to consider the disadvantages, including the cost of trust creation and trust management. You need to think about what tax benefits, if any, will be lost when you transfer property into an irrevocable trust and whether any offsetting tax benefits will be gained. You need to make sure the assets you wish to protect can be put into the trust you are creating, because not all assets can be. Finally, you need to weigh the downside of giving up personal access and use of the assets held within the irrevocable trust, and possibly even a significant degree of control.
While these downsides can be significant, the benefits and advantages of irrevocable trusts often outweigh any negatives. Whether this is true for you will depend on your specific situation. An estate planning lawyer can help you decide if the creation of an irrevocable trust makes sense or if there is a better alternative.
Getting Help from An Estate Planning Lawyer
Parman & Easterday can provide extensive help in determining what types of trusts should be part of your incapacity plan and estate plan. We can advise you on how different trusts can be used to provide you with protection and control, and can assist you in creating a trust that is valid and enforceable so you receive the benefit of the expected protections.
To learn more about how irrevocable trusts work and what benefits and protections these trusts can offer, join us for a free seminar. You can also give us a call today at (405) 703-9987 or contact us online to speak with a member of our legal team and get personalized help with the process of trust creation, incapacity planning, and asset protection.