The whole idea of an irrevocable trust is giving up the total control of your assets to another party, something many would not sit pretty with. However, some benefits could come with setting up an irrevocable trust and having your assets in it.
Here is why you should consider having one of these trusts in your estate plans if you haven’t considered it:
It will protect your assets
In most cases, creditors cannot repossess property held in an irrevocable trust since it is, in essence, owned by the trust. It means that if the beneficiary of the trust defaults on a debt, the property in a trust will be safe from creditors. Even in the case of a divorce, property held in an irrevocable trust is not considered marital property, and it is not up for division between the splitting couple.
It will minimize estate taxes
Since you no longer own the property in an irrevocable trust, it is not considered part of your estate when paying estate taxes. Irrevocable trusts file their tax returns separately since the trust is designed to live on after the grantor dies.
It can help retain eligibility for important benefits
To receive government aid, such as Medicaid, you must meet specific income and assets threshold requirements. Otherwise, your application will be denied. However, you can still qualify for such aid programs by having your assets in a special kind of irrevocable trust.
Is an irrevocable trust right for you?
While it may have its benefits, setting up an irrevocable trust is not something you should rush into. It may be hard to amend everything if you happen to change your mind down the road.
Learning more about this and other kinds of trusts will help you make the best decisions to meet your individual estate planning needs.