Irrevocable trusts are just that—you generally cannot change or revoke the trust after you create it. These trusts are therefore much less flexible than revocable living trusts, but they do have some benefits that revocable trusts don’t offer.
Proceed carefully before creating an irrevocable trust, and always get legal assistance from an estate planning attorney when creating the trust. You may be irrevocably giving up your right to the trust assets.
Benefits of Irrevocable Trusts
Irrevocable trusts are commonly used by individuals with large estates to minimize estate taxes. The contents of the trust are no longer owned by the person who created the trust (known as the grantor). The assets won’t be part of the grantor’s estate or subject to estate taxes.
Irrevocable trusts can also be named as beneficiaries of life insurance policies or used for asset protection purposes. In some cases, the grantor can also be a trust beneficiary.
Married couples can also use irrevocable trusts. This can be valuable when the decedent spouse wants to bequest assets to their spouse, but also to direct how the assets are used after their spouse’s death.
Irrevocable Trusts and Medicaid Planning
Irrevocable trusts can also be used in Medicaid or long-term care planning. Medicaid has asset limitations, and placing assets into an irrevocable trust could other a person to qualify for Medicaid coverage of long-term costs, which can be substantial.
Remember that placing assets into an irrevocable trust requires giving up control of these assets. You can’t get the benefits of an irrevocable trust (tax savings, etc.) without giving up this control. There are also strict regulations that apply to Medicaid eligibility, including look-back periods.
There are a limited number of situations where you may be able to change the terms of an irrevocable trust. If the grantor is living and all parties agree to a modification (grantor and all beneficiaries), then North Carolina may permit a modification of an irrevocable trust.
If your estate planning goals include minimizing estate taxes, asset protection, or Medicaid planning, ask your estate planning attorney whether an irrevocable trust is right for you.
King Law Offices is a full-service law firm with an outstanding team of professionals who work diligently, creatively and compassionately on behalf of our clients each day. We serve the Upstate of South Carolina and Western North Carolina. Call 888-748-KING (5464) today for a consultation.