A grantor can design a trust in many different ways to fit the needs of a family. One common estate planning tool is the irrevocable trust. As the name indicates, irrevocable trusts generally cannot be modified once it is finalized, at least not without the permission of the trust’s beneficiaries.
Often used in conjunction with other estate planning tools, the irrevocable trust legally removes assets from the grantor’s estate so that they are not taxed annually or upon death. Along with tax advantages that a revocable trust does not provide, an irrevocable trust can shield assets from creditors and control payment schedule to the beneficiaries.
Other key features
Different irrevocable trusts highlight different strategies, along with the points above, standard points include:
- Property transferred: Grantors no longer own any property put in this kind of trust.
- Useful for long-term care: This arrangement can allow the grantor to transfer assets so they qualify for Medicaid benefits – this should be done five years before the benefits are needed.
- Trustee: The grantor cannot be the trustee of an irrevocable trust.
- Special needs: This trust is used to provide long-term care for people who are disabled, yet these can still enable beneficiaries to meet income restrictions for Social Security and other aid programs.
- No strings: The beneficiaries are not obligated to pay any taxes incurred by the estate.
Different families need different trusts
Trusts, whether irrevocable, revocable or some other specific type, can be a tremendous help to loved ones and beneficiaries. Those with questions are best served by determining their needs and discussing these with an attorney who has experience handling trusts and other estate planning matters.