If you’re considering protecting your assets or using your wealth to leave behind a legacy, you may want to consider an irrevocable trust as part of your estate planning.
Unpaid debts, lawsuits, or an illness can jeopardize your savings and investments. Fortunately, irrevocable trusts may be a way to safeguard your assets.
At Loew Law Group, we have dedicated estate planning and civil litigation attorneys to help protect your assets and your legacy. If you’re thinking about setting up an irrevocable trust, or have other any questions about your estate, contact us today!
What Is an Irrevocable Trust?
An irrevocable trust may be established during your lifetime and remain in the hands of your chosen trustee after you pass away.
What distinguishes irrevocable trusts from other trusts is that you cannot change or modify their conditions. Once an irrevocable trust has been established, changes can’t be made. While this means you sacrifice some control over the assets in the trust, it also means that the assets may be protected from creditors, and may pass to your heirs and beneficiaries as you intend them to.
There are many types of irrevocable trusts that are structured to meet certain needs. Some are designed for charitable donations, some to protect assets, and others as a means to receive tax breaks.
No matter what type of irrevocable trust you are considering, you’ll need the guidance of an experienced estate planning attorney to help safeguard your assets.
Advantages of Establishing an Irrevocable Trust
Many individuals choose irrevocable trusts for the various advantages they provide. Some of the most attractive benefits include:
Inheritance and Heirs
While trusts are often used to leave assets to heirs after people pass away, this can also be achieved using a revocable trust.
Revocable trusts are generally the preferred choice in inheritance arrangements because they’re more flexible and can be modified during your lifetime, unlike irrevocable trusts. But even revocable trusts generally become irrevocable when you die or become incapacitated. In other words, you or your spouse are generally the only parties who can modify your revocable trust.
Qualifying for Medicaid
People sometimes require long-term care as a result of illness or serious medical conditions. In California, MediCal benefits, unlike Federal Medicare, often have strict income and financial requirements.
By placing your assets into an irrevocable trust, you may be able to reduce your overall wealth until you meet the requirements to qualify for MediCal benefits.
In some situations, your estate might be large enough to be taxed under federal estate tax provisions.
By redistributing your assets into a trust, you may be able to legally reduce the size of your estate and benefit from avoiding hefty tax payments – especially if you fund the irrevocable trust with a life insurance policy, your residence, or other assets that may appreciate in value during the life of the trust.
Who owns the assets in an irrevocable trust?
When you establish a trust, you assign a trustee who becomes the legal owner of any property and assets placed within it.
Though this trustee has full authority over your assets, they still have a financial obligation to act for the good of the listed beneficiaries. Depending on the trust’s legal terms, the trustee will be responsible for managing any investments, distributing assets, and making other important financial decisions.
When can the assets in an irrevocable trust be used?
Irrevocable trusts are flexible, and there are many ways to establish conditions for how your assets will be accessed. You and your attorney can work together to set conditions for disbursal, such as a beneficiary graduating from high school or college or even getting married.
You can also establish payment plans and allowances for beneficiaries. In these arrangements, funds are distributed according to a set schedule or timeline.
If investing is your goal, you can create conditions that will only pay out funds if the performance of your investments turns a profit.
If you’re only interested in leaving behind a legacy, then the trust assets may simply be distributed upon your death to the parties of your choosing, according to your terms, without going through probate court.
What Is The Downside Of An Irrevocable Trust?
The biggest downside of an irrevocable trust is the lack of flexibility. Once established, you generally cannot change the terms, beneficiaries, or assets in the trust, making it crucial to carefully consider its purpose and potential future needs before setting it up.
Establishing an Irrevocable Trust in California
When you consult with Loew Law Group, our dedicated attorneys will review your financial situation to decide the best course of action.
For many people, estate planning can be stressful. But our knowledgeable team will work with you each step of the way to meet your needs from beginning to end. If you have any questions about irrevocable trusts, call us today.