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Examining Whether An Irrevocable Trust Works For You

The experienced Brevard County attorneys of Goldman, Monaghan, Thakkar & Bettin, P.A. can help you in estate planning matters such as establishing an irrevocable trust. This is a three-party arrangement whereby a settlor, the creator of the trust, transfers assets to a trustee and gives up rights of ownership to the assets for the benefit of people who will eventually receive the trust property. Florida’s laws related to irrevocable trusts are among the most flexible in the nation.

Establishing an Irrevocable Trust

Once you have established a trust, the trustee maintains legal title to the property, and the beneficiaries hold equitable title. You no longer have title to the property. In many cases, since it is “irrevocable,” you cannot undo the effects of the trust to reclaim the property unless you have the consent of the trustee and the beneficiaries. However, there are circumstances in which a settlor can modify an irrevocable trust, although it is still considered irrevocable because a settlor can never do this completely on his or her own.

Why would you transfer your assets to be managed by a trustee? Placing assets in an irrevocable trust has a number of benefits, including protection of assets over the long-term. An irrevocable trust also permits a disabled person to have an unlimited amount of assets held for his or her use without affecting the individual’s eligibility for certain government benefits. An irrevocable trust allows you to avoid guardianship in case you become mentally or physically impaired such that you cannot make decisions for yourself. Furthermore, it allows you to pass assets to beneficiaries without probate.

Importantly, an irrevocable trust established in Florida is a strategic way to protect an elderly person’s assets from being depleted by the costs of nursing home care. The assets are not available to be used for paying expenses for a nursing home or assisted living facility. This means that the elderly person can get financial help from Medicaid.

Asset Protection

Trusts offer asset protection in two ways. First, a settlor can include a “spendthrift clause” in the trust agreement. The spendthrift clause restricts a beneficiary’s ability to transfer, sell, or give away any rights in a trust. In general, a creditor can’t take what the beneficiary doesn’t have the right to give to it, and this means the assets cannot be taken. Florida Statutes section 1736.0503 covers exceptions to the spendthrift provision. Among other things, it prevents it from being enforceable against the beneficiary’s child or former spouse with regard to a child support or alimony claim, against the government, or against someone who has provided services for the protection of the beneficiary’s interest in the trust.

The second way that asset protection is provided is through a provision in the trust agreement giving the trustee discretion about whether to make distributions to trust beneficiaries. Since the trustee has discretion about whether to make distributions to beneficiaries, the beneficiaries’ creditors can’t compel a distribution or reach the trust assets. This protection applies even if the trustee abuses his or her discretion.

If the settlor of an irrevocable trust and the trust beneficiary are the same person, however, the trust is a “self-settled trust.” With these types of trusts, a creditor of the settlor can reach the maximum amount of the assets that could be distributed for the settlor’s benefit. For example, if the trustee is given discretion to give the settlor as much or as little as he or she believes appropriate with regard to an irrevocable trust, the creditor could reach all of the assets irrespective of the trust agreement having spendthrift or discretionary distribution provisions.

Seek Advice from a Wills and Trusts Attorney in Cocoa

A wills and trusts document should only be drafted by a lawyer with a strong knowledge of the challenges and complexities of asset protection clauses and a firm understanding of your objectives. The Cocoa attorneys at Goldman, Monaghan, Thakkar & Bettin, P.A. can give you sound advice and draft an irrevocable trust to meet your asset protection needs. Contact us at 321-353-7625 or via our online form.