Individuals willing to give up control and transfer ownership of their assets may prefer an irrevocable trust over a revocable living trust. Kiplinger’s Personal Finance reports that an irrevocable trust may protect your assets from creditors while revocable living trusts may not.
If the purpose of creating a trust includes asset protection, you may execute documents stating you do not control the trust’s assets. You may, however, name a trustee, list your beneficiaries and include instructions for the trustee to follow. Because of the nature of an irrevocable trust, you may not change it after its creation. With a living trust you may change the documents at any time until you die.
What other advantages may an irrevocable trust provide?
An irrevocable trust may accomplish more than protecting your property from creditors. It could also help when you need financial assistance. After establishing your trust, you may transfer assets to it by retitling property to it. When you no longer own these assets, you may become eligible to apply for government programs.
According to the American Council on Aging’s website on Medicaid planning, Florida residents may qualify for benefits that include long-term care. Single residents, for example, may receive assistance for at-home or nursing home care when they own assets totaling no more than $2,000. If your trust takes ownership of your assets, you may become eligible for the program.
How may an irrevocable trust minimize estate taxes?
To reduce estate taxes, trust documents may need to include specific instructions for distributing assets to beneficiaries. As noted by U.S. News, a trust generally requires giving up ownership of assets; they no longer represent part of your taxable estate.
Some individuals may consider an irrevocable trust over a living trust. Effective estate planning often involves consideration of which type of trust provides for both your current and future needs.