Estate Planning: What is an Irrevocable Trust?
A trust can be an effective estate planning tool. When set up properly, trusts can offer a number of different benefits—from protecting assets to avoiding probate. An irrevocable trust is one type of trust. At Poulos LoPiccolo PC, we have deep experience with trust planning. Here, our New Jersey & New York estate planning lawyer provides a guide to irrevocable trusts.
Irrevocable Trust: Defined
Investopedia defines an irrevocable trust as a “type of trust where its terms cannot be modified, amended or terminated. Once the trust is set up and assets are transferred into it, the grantor—the person who set up the trust—relinquishes control over those assets and removes them from their taxable estate.
Four Key Advantages of an Irrevocable Trust
Why set up an irrevocable trust? There are a number of different benefits. Here are four key advantages of setting up an irrevocable trust as part of an estate plan in New Jersey or New York:
- Creditor Protection: Irrevocable trusts can shield assets from creditors because the assets are owned by the trust—not the grantor. These trusts are a strong asset protection tool. Creditors cannot go after assets within a properly set up irrevocable trust.
- Estate Tax Benefits: By transferring assets into an irrevocable trust, they are removed from the grantor’s taxable estate. For high asset people, this can result in significant tax savings. With that being said, not all estates are subject to estate tax liability.
- Medicaid Eligibility: Assets held in an irrevocable trust may not be counted towards the grantor’s personal assets when determining Medicaid eligibility. It is a key advantage because it can help a person qualify for long-term care.
- Probate Avoidance: Assets held in an irrevocable trust bypass the probate process. It is a major benefit that allows for a faster, private distribution of assets to the proper heirs. While not the only way to avoid probate, irrevocable trusts do offer that as an advantage.
An Irrevocable Trust Cannot Be Revised (Not Right Option for Every Situation)
Although it can be an extremely valuable estate planning tool, an irrevocable trust is certainly not the right option for every situation. Remember, once established, an irrevocable trust cannot be easily revised or revoked, making it a permanent financial arrangement. The inflexibility means it is not suitable for every situation. For people who anticipate significant changes in their assets or beneficiaries—such as young families or those with fluctuating business interests—an irrevocable trust may be too restrictive. A top-tier estate planning lawyer can help you determine the right solution for your specific situation.
Speak to Our New Jersey & New York Estate Planning Lawyer Today
At Poulos LoPiccolo PC, our New Jersey & New York estate planning attorney has extensive experience with trust planning issues. If you have any questions or concerns about irrevocable trusts, we are a resource that you can trust. Contact us now for a completely confidential initial appointment. Our firm handles trust planning in New Jersey and New York.
