You may have decided to set up living trust to protect your assets, but what kind of trust best suits your needs? What’s the difference between revocable and irrevocable trusts?
In this article, we will explore the advantages of an irrevocable trust and when it could be the right option for you. To learn more, contact an Indianapolis irrevocable trust lawyer at Barnes Cadwell Law today. We can help you create a comprehensive estate plan that protects your assets.
What Is a Trust?
A trust is an estate planning tool that holds your assets for designated beneficiaries while you’re alive. Like wills, trusts allow you to transfer your wealth to your loved ones after you die. However, unlike wills, trusts allow you to control the transfer while you are still living.
Trusts can be beneficial because they allow you to avoid probate. This means a quicker distribution of assets to your heirs and beneficiaries. It also translates into savings to your estate from avoiding court costs and contests. Trusts will also provide you privacy because they aren’t made public, unlike wills. This allows your assets to be distributed in private.
Revocable vs. Irrevocable Trusts
Trusts can be either revocable or irrevocable. Revocable trusts can be modified or withdrawn at any time while you are alive. Irrevocable trusts, however, cannot be amended or cancelled once they are created.
Trusts in a will are irrevocable because they are created after your death. In the same way, a revocable trust you create in life becomes irrevocable upon death.
Both revocable and irrevocable trusts are similar in that they’re created by a grantor who funds it with their assets. Both are also managed by a trustee who protects the assets to benefit the grantor’s heirs. Finally, revocable and irrevocable trusts benefit named beneficiaries who receive the grantor’s assets once they pass.
When Is an Irrevocable Trust Right for You?
On the surface, it may seem more advantageous to establish a revocable trust than an irrevocable trust. After all, you have more control over your assets when you can change or withdraw the trust while you’re alive. An irrevocable trust, on the other hand, requires that you give up control to an extent.
An irrevocable trust may be a better option for you if you want to accomplish certain goals. Here are four advantages of creating an irrevocable trust that might make it the best option for you:
1. Protection From Creditors
An irrevocable trust provides protection of your wealth against creditors and others who might sue you in the future. Your assets held in a revocable trust are considered part of your estate. This is due to the fact that you can cancel a revocable trust and reclaim its assets while you’re alive.
An irrevocable trust, on the other hand, is not owned by you. When you fund it, you must transfer ownership to the trust. Once you establish one, neither you nor a creditor can modify, cancel, or take assets from an irrevocable trust. So, any judgment against you after you’ve established the trust won’t target the trust’s assets.
2. Protection From Medicaid Restrictions
There’s a 50% chance that you will end up in long-term care, such as a nursing home, in the future. Medicaid can help pay the rising costs of long-term care. However, the government program has income and net worth restrictions for eligibility. An irrevocable trust can be set up to protect your assets from Medicaid’s eligibility restrictions. This will pave the way for receiving long-term care benefits should you need them at some point in the future.
3. Protection Form Your Heirs and Beneficiaries’ Creditors
An irrevocable trust can protect your wealth from your heirs and beneficiaries’ bad decisions. It can also protect your assets from creditors who may go after them. An irrevocable trust can be set up so that they can’t access their inheritance until certain conditions are met. As long as your assets are held in the trust, your heirs and beneficiaries’ creditors can’t access them either.
4. Protection From the IRS
Assets held in an irrevocable trust aren’t counted as part of your estate when determining estate taxes after you die. So, less of your wealth will be handed over to the IRS and more can benefit your heirs and beneficiaries.
An Indianapolis Irrevocable Trust Lawyer Can Help You Protect Your Assets
By consulting with an experienced irrevocable trust attorney, you will benefit from years of professional expertise and experience. We will work with you to determine whether an irrevocable trust will work for your unique needs. We will also draft the required documents necessary for your particular estate planning challenges.
At Barnes Cadwell Law, we understand that estate planning may not be a top priority for everyone, but we also know how important it is to protect your interests. We will work with you to give practical advice tailored to your needs. Contact us today to learn more about our services.