There Are Basically Three Reasons to Use an Irrevocable Trust
Did you know that an irrevocable ttrust cannot be modified, amended, or terminated without the permission of the beneficiaries? Set up to minimize taxes as well as other reasons, the grantor legally removes their rights to ownership. As an estate planning lawyer, we would like you to know more about the benefits of using the irrevocable trust.
1. To Minimize Estate Taxes
In order to avoid paying taxes when they die, people can use the funds from gifted money to purchase life insurance in an “irrevocable life insurance trust.” They may also create a trust that will be paying income to their family at the present time; at their death, a charity would receive the remaining portion. This type of trust is called a “charitable remainder unitrust” and can be created within the irrevocable trust.
2. For Asset Protection
Assets would have a shelter; your creditors will not have access to them. The trustee and beneficiary should be unrelated or, if related, have limited power over the trust fund.
For those who frequently face lawsuits, such as architects, developers, or surgeons, these protections would have a maximum benefit. However, state laws regarding asset protection may vary.
3. Eligibility for Government Programs
Those who are on Medicaid or who are receiving Supplemental Security Income have limits on the income that they are allowed. People who are disabled could lose their benefits if they have too many assets or too much property. The irrevocable trust shelters that income. In this case, the trustee and beneficiary cannot be the same person.
The beneficiary does not have control over the trust. The government then allows the funds to not be considered as assets or income of the beneficiary. This person may now continue to receive government benefits. Whether they are fully or partially disabled, government checks may be of great help.
More Information Regarding Trusts
Whether they are irrevocable or revocable, the trust will have three parties: The grantor, who creates the document that is the trust and transfers assets to it; the trustee, who is responsible for following the instructions of the trust and investing its funds while paying administrative expenses; and the beneficiary, who receives the benefits of the trust income or assets.
A revocable trust often has one person as all three parties, and it can be changed at any time. Credit protection is limited, however. Tax savings are minimal, and you will not qualify for any government programs.
With an irrevocable trust, it cannot be changed. A trustee with no relation to the beneficiary has been named and is responsible for certain actions. These actions might include filing estate taxes, handling assets in the trust, and distributing those assets. Talking to an estate planning lawyer can clarify the difference between a revocable and irrevocable trust.
Understanding Your Options
A clear understanding and a plan for the distribution of your property is necessary when it comes to estate planning. Your final plans can be a great gift to your loved ones with clear planning. An estate plan that is thought out and comprehensive will help alleviate much stress after your passing. You will also benefit from knowing that the estate is being handled according to your wishes.
As a small law firm, we get to know our clients. We believe in bringing our personal attention while getting to know you and your unique situation. However, our law firm offers the advantages and resources of a larger law practice.
We are your local New Jersey estate planning lawyer and have offices in Hackensack. The Knee Law Firm serves clients throughout Bergen County. Phone us at 201.996.1200 or contact us through our website. We will take the time to learn about the unique aspects of your situation. Moreover, we will constantly strive to answer your emails and calls in a timely manner.