An Irrevocable Living Trust generally cannot be modified or terminated except under certain limited circumstances. This type of trust requires the grantor to transfer assets into the trust and give up his or her rights of ownership to these assets. Which begs the question… why would you want to create an Irrevocable Living Trust, as opposed to a Revocable Living Trust?
The fact is, Irrevocable Living Trusts are among the most powerful tools available to elder law attorneys and their clients. When properly designed and implemented, they can provide an almost unsurpassed level of asset protection from the high cost of long-term care. Other reasons to utilize an Irrevocable Living Trust include:
- Avoiding the probate process
- Tax minimization
- Avoiding the risks of placing assets in the name of your children
While many different types of Irrevocable Living Trusts are available, in essence all of them retitle your assets.. Assets placed in an Irrevocable Living Trust can include a business, cash, investments, life insurance policies, and more.
Why is an Irrevocable Living Trust better than a Revocable Living Trust at protecting assets against the cost of long-term care?
Under current Medicaid laws, assets in a Revocable Living Trust are not fully protected. Why? Because assets in a Revocable Living Trust are available to the Grantor, Medicaid will state that those assets must be used to pay for long-term care. This is not the case with an Irrevocable Living Trust, as long as it is properly designed and implemented to take into account the latest laws governing Medicaid eligibility.
How does an Irrevocable Living Trust protect your children’s inheritance?
When you transfer assets directly to your children, they typically become outright owners of the assets. They also become responsible for the risks associated with owning the assets. A properly drafted and implemented Irrevocable Living Trust will avoid:
- Loss of inheritances due to lawsuits, divorce, remarriage, or the inability of your children to manage a large sum of money on their own
- Gift tax liability
- Income tax consequences for your children
- Problems with getting financial aid to cover educational and other expenses for your grandchildren
Why your Irrevocable Living Trust should be drafted and implemented by an experienced Chesapeake Bay Trust lawyer
An Irrevocable Living Trust is by its very nature “Irrevocable.” This means that it is essential to have the trust correctly written and implemented the first time around. While you may be able to have the trust revised under unusual circumstances, doing so can lead to a variety of problems and needless expense. An experienced elder law attorney can work closely with you to help determine your greatest concerns and goals, and design the Irrevocable Living Trust to address every one of them. To determine if an Irrevocable Living Trust is right for you, contact us today.