Irrevocable Trusts are an integral part of most asset protection planning strategies. They are used to protect property and assets from nursing homes and other predators and, depending on your individual situation, can end up saving you thousands of dollars. Savannah trusts attorneys have put together some of the basics to give you everything you need to know about Irrevocable Trusts.
Just as the name suggests, an Irrevocable Trust cannot be terminated once it is created which is what sets it apart from a Revocable Trust. The reason it cannot be revoked is because of the many benefits afforded by the trust for protecting assets and shielding against taxes. Revocable Trusts are good for avoiding probate and allowing successor trustees to manage affairs if the grantor becomes incapacitated while Irrevocable Trusts are mainly used for asset protection purposes.
A Lifetime Trust
There are actually two types of Irrevocable Trusts – Lifetime and Testamentary. A Lifetime Trust comes into effect and is irrevocable as soon as it is initially funded, meaning the ownership of assets changes while the grantor is still alive and stays that way after the grantor passes away. A Testamentary trust becomes irrevocable when the grantor dies, meaning the terms of the trust cannot be changed after that point. Most Revocable Trusts become Irrevocable at the time of the grantor’s passing while other Testamentary trusts are created through the Last Will and Testament.
Different Types of Irrevocable Trusts
As noted earlier, Irrevocable Trusts are designed to save money either by reducing taxes or protecting assets. There are many different types of Irrevocable Trusts available depending on what situation you’re in and what goals you’d like to accomplish. Here are a few of the irrevocable trusts and their benefits:
- A Bypass Trust is used to significantly reduce estate taxes once the second spouse has passed away. The trust holds all the assets from the first spouse, meaning the surviving spouse does not actually own the assets. This reduces the amount of the estate for estate tax purposes.
- A QTIP Trust is used to delay or postpone the payment of estate taxes once the second spouse passes away.
- A Medicaid or Special Needs Trust holds ownership of a person’s assets in order to make them eligible for state and/or federal benefits, either when it is time to enter a nursing home or if the benefits are in danger of being lost due to an inheritance.
If you have questions about setting up an Irrevocable Living Trust, or if you’d like to have your current Irrevocable Living Trust reviewed by an experienced trust attorney, please give our Savannah estate planning and asset protection planning law firm a call at (912) 352-3999 or email us at [email protected] to set up a consultation.