In this article, you can discover:
- The differences between irrevocable and revocable trusts in estate planning.
- The advantages of Irrevocable trusts, including asset protection and Medicaid qualification.
- What you should know about trust protection exceptions.
What Is An Irrevocable Trust And How Does It Differ From A Revocable Living Trust?
The revocable living trust is a straightforward estate planning tool which provides complete control over all the assets for the Trustee who is usually also the Grantor (the person making the trust). It is not used to avoid taxes. Primarily, the revocable trust transfers power from the Probate Court to the designated Trustee after the Grantor passes away. This means control is in the hands of someone you TRUST – and not a stranger in a black robe in a courtroom.
In contrast, an irrevocable trust represents a specialized planning tool within estate planning with a high level of complexity. Its primary purpose is to reduce an individual’s asset portfolio in order to qualify for Medicaid or other government benefits. Also, these Trusts offer some asset protection if appropriate provisions are included. It is called irrevocable because the Grantor cannot take back the assets without significant penalties during a process called “decanting.”
However, you should not shy away from an irrevocable trust if you need one because when an irrevocable trust is required, it is absolutely critical to protect your legacy and ensure your access to medical benefits. The absence of an irrevocable trust can cost families hundreds of thousands of dollars in medical expenses.
Keep in mind while the trust is not revocable, the Grantor does retain control over beneficiary designation and final asset distribution through the directions in the Trust.
What Are The Primary Advantages Of Establishing An Irrevocable Trust?
The primary advantage of an irrevocable trust lies in its ability to separate assets from the grantor’s direct control and ownership. This separation ensures that these assets are not readily accessible for personal reimbursement, thus providing protection against claims and aiding in Medicaid qualification.
From an estate planning perspective, the benefits include those of a revocable trust, with the added advantage of reducing the assets titled in the grantor’s name. This strategy not only safeguards assets but also aids in covering extensive medical expenses through Medicaid benefits.
How Does An Irrevocable Trust Help Protect Assets From Creditors And Legal Claims, And Are There Any Exceptions To This Protection?
An irrevocable trust primarily protects assets from creditors and legal claims by removing them from the direct control of the grantor. This disassociation means creditors cannot force the Grantor to lay claim to these assets to satisfy a judgment or claim.
While there are some exceptions to this protection, it is essential to discuss these with an attorney. You should understand how exceptions apply to your individual circumstances instead of relying on a generic list of exceptions.
What Types Of Assets Can Be Included In An Irrevocable Trust?
The types of assets that can be placed in an irrevocable trust are largely similar to those in a revocable trust. These include bank accounts, real estate, and other assets with lower earning potential.
It is important to note that certain assets, like large retirement accounts, do not necessarily disqualify you from Medicaid in Florida, provided minimum required distributions are taken. Although in different ways, both revocable and irrevocable trusts help secure assets for future generations.
For more information on Irrevocable Trusts In A Florida Estate Plan, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling (904) 650-4262 today.