Why Set Up an Irrevocable Trust Instead of a Revocable Trust?
A trust can be one of the most effective, efficient estate planning tools. These are many different types of trusts—including those that can be changed (revocable trusts) and those that cannot be changed (irrevocable trusts). This raises an important question: Why would you set up an irrevocable trust instead of a revocable trust? The short answer is that irrevocable trusts provide more comprehensive asset protection, tax advantages, and may be the best option to support a loved one with special needs. Here, our Monmouth County irrevocable trust lawyer provides a more comprehensive overview of the advantages of setting up a trust that you cannot change.
Irrevocable Trust: Defined
Investopedia explains that an irrevocable trust “removes certain assets from a grantor’s taxable estate, and these incidents of ownership are transferred to a trust.” An irrevocable trust is a type of trust where its terms cannot be modified, amended, or terminated without the permission of the grantor’s named beneficiary or beneficiaries. Once the trust is set up and assets are transferred into it, the grantor relinquishes all control over those assets and the trust.
The Three Main Advantages of an Irrevocable Trust
An irrevocable trust cannot be changed. The person who creates one loses control over the property and assets placed within it. For obvious reasons, that is a drawback when compared to a revocable trust—which can be changed at any time. So why set up an irrevocable trust? Here are three of the main advantages of using an irrevocable trust as part of your estate plan in New Jersey:
- Asset Protection: Unlike revocable trusts, irrevocable provide strong asset protection. With a living revocable trust, there is no true asset protection. An irrevocable trust offers robust protection for assets by legally removing the grantor’s ownership—making them inaccessible to creditors and legal judgments. It makes this type of trust the ideal structure for preserving wealth.
- Tax Benefits: In contrast to revocable living trusts, irrevocable trusts provide tax benefits. Assets placed in an irrevocable trust are removed from the grantor’s taxable estate, potentially reducing estate taxes upon their death. Beyond that, the trust can be structured to minimize gift taxes when assets are transferred to beneficiaries.
- Special Needs Eligibility: Finally, a unique type of irrevocable trust—referred to as a special needs trust—is the most effective tool to provide for a loved one who needs special services. Indeed, An irrevocable trust can be specifically designed to provide financial support to a beneficiary with special needs without disqualifying them from receiving government benefits like Medicaid or Supplemental Security Income (SSI).
Contact Our Monmouth County Irrevocable Trust Attorney Today
At Poulos LoPiccolo PC, our Monmouth County estate planning lawyers are here to help you put the right structure in place to achieve your goals. If you have any questions or concerns about irrevocable trust, we can help. Contact us now for your completely confidential initial appointment. With an office in Monmouth County, we provide irrevocable trust services throughout New Jersey.
