Having an irrevocable trust remains an effective way to protect your estate’s assets. Such a trust cannot be changed in any way. The terms within the trust make it permanent, but exceptions do exist. There are key advantages of irrevocable trusts compared with other estate planning strategies.
For example, certain tax benefits exist, and the assets are protected from lawsuits. Also, the trust avoids probate – a costly and time-consuming legal process – and the assets receive protection from lawsuits. And since the trust avoids probate, its terms remain private, never to be disclosed to the public.
Privacy, tax and lawsuit protections
Here are some of the advantages of having an irrevocable trust:
- Timing when transferring assets: Assets can be held for indefinite periods before transferring to beneficiaries. The time frame could be several weeks or months as well as many years after your death.
- The assurance of privacy: Since the trust does not go through the probate process, its contents remain private. This is a key difference compared with wills, which are filed with courts and go through the probate process.
- Certain tax protections: You gain estate tax protections since the property transferred does not contribute to your estate’s value. This strategy is ideal for people with large estates.
- Certain lawsuit protections: Since you transferred ownership of your assets and cannot take back property, those assets remain protected from creditors as well as judgments. This can be beneficial to people who work in occupations that often face lawsuits. This group may include physicians, attorneys, architects and business owners.
- Protecting government benefits: Assets do not count against you and beneficiaries when seeking government benefits such as Medicare, Medicaid and Supplemental Security Income. For example, the funds may be protected from nursing home costs as long as you have funded the trust for a minimum of five years before requiring care. Also, beneficiaries with special needs receive protection and continue to qualify for government benefits.
An irrevocable trust has many advantages. But, remember, in many states, including New Jersey, an irrevocable trust may be modified if all the beneficiaries and the trustee agree to make the changes.