One kind of trust that can be highly beneficial is the irrevocable trust. An irrevocable trust is one that you cannot change. Once you set up the rules, that trust stays firm. It holds your assets in the name of a third party and will not distribute them until the terms of the trust are met.
An irrevocable trust does have benefits while you’re still alive. One of the most significant is that it removes assets from your estate. As a result, creditors that try to collect against you cannot seek those assets in most cases.
In the long term, this kind of trust also has tax benefits, since the assets you place in the trust aren’t part of your estate for the purposes of taxation. There may be other tax benefits that help during your lifetime as well.
Irrevocable trusts offer protection
The main point that makes irrevocable trusts so excellent is how they protect your assets. They protect them from creditors if you go into debt, for example. They also protect them against those who may try to take advantage of you.
Here’s an example. If you set up an irrevocable trust that manages a large portion of your income for the benefit of your beneficiaries, then that money will be protected in that account. If someone else in the family tries to manipulate you into changing the beneficiary or splitting it up, you won’t be able to. This is extremely helpful to those who have memory loss or neurological disorders that may deteriorate and leave them vulnerable to others’ actions.
Irrevocable trusts also remove assets from your estate in a way that, when done soon enough, may help you lower your estate’s value and qualify for Medicaid. Since Medicaid has strict limits for qualification, you’ll want to do all you can to minimize your assets, while still protecting them for your beneficiaries, before you need it.
Estate planning can be complex, but you’re not alone if you need help. There are excellent options, including irrevocable trusts, that can help you plan for your future and those who will outlive you.
