What is an Irrevocable Trust?

An Irrevocable Trust is a contract between the Grantor (the person or persons who creates the trust), the Trustee (person or persons who control the trust) and the beneficiaries (those who benefit from the trust).

You, as Grantor, determine how the trust will be operated and who benefits, how and when. Again, you can be one of the Trustees of the Irrevocable Trust.

Irrevocable Trust / Asset Protection Trust does not mean unchangeable. An Irrevocable Trust can still be modified if you wish, for example, if a child moves far away, becomes estranged, or otherwise upsets you, you can modify the trust to omit that child as a beneficiary.

If a child dies or becomes disabled, no changes are needed because that is addressed in the document. Preparing for the worst-case scenario and hoping for the best is how Vertical Estate Planning prepares and protects your family.

An Irrevocable Trust can protect your assets from the…

nursing home, divorce, disability remarriage, dementia, and creditors.

To adequately protect your assets, your Irrevocable Trust must be carefully crafted and tailored to meet the needs of your family.

Once an Irrevocable Trust is created, the Trust is now a new owner/like a business.

Customization is key to accomplish your stated goals.

With that said, with an Irrevocable Trust you are the Trustee and even though you do not own the asset, house, or money, you are still direct how that asset is used.

The thing you give-up (everything has a cost – right?) is direct access to your money. On the face of that statement, that sounds bad but if you can give money to someone else (life beneficiary) who either returns the money or spends it on things you want or at your request and for your benefit, the Irrevocable Trust is like having your cake and eating it, too!

A Tax reduction or Avoidance Trust are much more restrictive than asset protection trusts. Typically, you cannot retain any right to control or access any of the assets in an irrevocable tax reduction/avoidance trust.

Irrevocable Trusts can be flexible and grantor-friendly while protecting your assets from the nursing home and yourself.

Do the benefits of an Irrevocable Trust outweigh the cons? To establish an Irrevocable Trust requires that you as the trustor must give up their rights to the Trust. This means they cannot change the trust without the consent of the beneficiary. Here are some possible reasons for Alabamians to consider an irrevocable trust:

Minimize Estate Taxes: Perhaps the biggest benefit of having an irrevocable trust is to minimize your estate taxes. Property and assets that are placed in an irrevocable trust do not count toward the gross value of your estate. For those with a substantial amount of assets that go beyond the estate tax exemption, it may be advantageous to set up an irrevocable trust.

Protect Your Assets from Creditors: To shield your assets from creditors, the trust usually needs to be irrevocable, and the trustee and beneficiary usually need to be unrelated parties. These are known as “asset protection trusts”.

Become Eligible for Government Programs: Certain types of irrevocable trusts can be used to help someone qualify for a government program that has strict income and asset limitations.