Regardless of whether you are just beginning the estate planning process, or you have had plans in place for years, you may have heard the term “irrevocable living trust” thrown around and found yourself wondering exactly what it means.
Essentially, an irrevocable living trust is a legal arrangement you can create as a method of leaving assets to a named beneficiary. An irrevocable living trust differs from a revocable living trust in that you cannot change it after its creation, but it can be a solid estate planning tool that enables you protect your assets and save on taxes. Once you fund the trust, you no longer maintain direct control over the assets you place inside, but you do, however, maintain control when it comes to the guidelines that govern the trust.
People create irrevocable living trusts for numerous different reasons. Maybe you want one of your children to receive money at regular, set intervals, or maybe you want to leave your disabled child assets in a manner that will not affect his or her public assistance eligibility.
While creating this type of trust typically reduces the amount you must pay in capital gains taxes, it also reduces the amount of estate taxes owed after your passing.
An irrevocable living trust can also protect your assets if you pass away or fall on hard times. If, for example, someone sues you or you file for bankruptcy, the assets in the trust remain protected.
Protection with regard to long-term care
Placing assets in a trust can also result in substantial Medicaid savings because it allows you to secure Medicaid benefits if you need to move into a nursing home or continuing care facility.
While these are some of the more notable benefits of establishing an irrevocable living trust, please note that this is not an exhaustive list of all associated advantages.