Irrevocable trusts have become increasingly used by practitioners as an estate planning tool for asset protection. The Irrevocable Trust may be used for a variety of purposes. Generally, irrevocable trusts are used by estate planning attorneys to minimize out-of-pocket costs for nursing home expenses. If properly prepared, an irrevocable trust may help an individual qualify for Medicaid and protect your assets from the high costs of nursing home care. You should contact irrevocable trust attorney for asset protection.
Similar to the revocable trust, an irrevocable trust is created by an individual (the settlor) who transfers assets into the trust. Many of the same benefits of revocable trusts also apply to irrevocable trusts, i.e. avoid probate, privacy, save on legal fees and commissions. In addition, however, irrevocable trusts have the added benefit of protecting your assets in the event you need Medicaid and can also help avoid estate taxes.
There are two important differences between the irrevocable trust and revocable trust. First, the irrevocable trust cannot be revoked, reversed or recalled, and there cannot be any distributions of the principal of the trust to the settlor. Therefore, once assets are transferred into an irrevocable trust, they must remain in the trust. Second, you have less control with the irrevocable trust. The settlor does choose the trustee(s) and beneficiary(ies) (typically your adult children or a trusted individual), but the settlor is not the trustee or beneficiary of the trust. The settlor may add assets at any time but taking assets out of the trust is not allowed (the trust may sell and buy assets). However, the settlor is entitled to the income generated by the assets in the trust. It is specifically due to this lack of control that the irrevocable trust has the benefit of protecting your assets from creditors.
Although transferring assets into an irrevocable trust is permanent, there is the ability to get benefits from those assets. This is why properly drafted trust documents and asset transfer documents are crucial. Here is an example:
- You may want to quality for Medicaid and protect your family home from the high costs of nursing home care, which could cost $200,000.00 per year. You also want to protect your right to live in the home until you need nursing home care. Properly drafting the deed that transfers your home into the irrevocable trust will protect your right to live in your home and will also preserve real estate tax exemptions you may currently have.
- In addition, once you are living in a nursing home, if no one is living in your home, it may be rented and you are entitled to the income from the trust. You could then use this income to supplement the cost of residing in an assisted living facility rather than a nursing home.
The above example is one of the many ways an irrevocable trust may be used in your estate plan to help qualify for Medicaid and protect your assets from high nursing home costs and/or creditors.
Our firm works closely with our clients to ensure they understand the irrevocable trust and the other various options available. Our focus is to not only understand our clients’ needs and goals, but also ensuring our clients understand their estate plan and the related complex issues. In this important process, our clients are as much involved in the drafting and implementing of their estate plan as we are.
The attorneys at James G. Dibbini & Associates, P.C. have over 20 years of experience in Wills, Trusts & Estates.
In order to learn more about how we can assist you with your Wills, Trusts and/or Estates matter, please feel free to contact us directly.