What can an irrevocable trust do for you?

There are many estate planning tools available to help individuals preserve their assets and provide for others long after they are gone. In most cases, an estate plan includes some form of trust, which holds assets and protects them from legal challenges and excessive taxation. However, trusts come in many forms, and each type of trust serves a specific purpose. While having some form of trust is typically better than not using a trust at all, it is always important to choose a trust with strengths and features that match your needs and priorities.

An irrevocable trust can provide some of the strongest protections available in any form of trust, but this security comes with a significant caveat. Once you create an irrevocable trust, you cannot alter its terms. If you suspect that an irrevocable trust is a good fit for your needs, be sure to carefully review all the issues at hand before finalizing it. Otherwise, you may run into unavoidable complications in the future.

Advantages of irrevocable trusts

The primary advantage of an irrevocable trust is the complete separation that you may enjoy from property that you place in the trust. Once placed inside, your assets are difficult or impossible for creditors, beneficiaries or even a spouse to reach.

These trusts also impact personal and estate taxes significantly. Any property that you place in an irrevocable trust no longer legally belongs to you, which may allow you some flexibilty come tax season.

These are also very useful for those who worry that the size of their estate may disqualify them for government assistance, much like a special needs trust. You may have the ability to place your assets in the trust, reducing your legal income below the qualifying threshold for programs like Medicaid and Medicare.

Drawbacks of irrevocable trusts

If everyone was willing to draw up terms and live with them for years to come, many more people would choose to create irrevocable trusts. However, these tools are fairly inflexible. If you miscalculate the needs of yourself or your beneficiaries, or if your life changes drastically and the terms of an irrevocable trust no longer make sense, you have limited options.

Before creating any trust, it is important to make sure you clearly understand all the legal issues involved, as well as the potential complications that might arise in the future. The strength of an irrevocable trust is very attractive to many people, but only a few have the clarity to plan for the future with the confidence that an irrevocable trust requires.

If you believe that your assets need the protections of an irrevocable trust, you should use high quality legal resources and guidance to make sure that you have a complete understanding of the risks and rewards involved. With careful planning and attention to detail, you can use the strength of the law to protect your rights and legacy.