An Irrevocable Living Trust requires the person who creates it to transfer assets into the trust and give up his or her rights of ownership to these assets. You might be asking yourself why you would want to create an Irrevocable Living Trust, as opposed to a Revocable Living Trust?
Irrevocable Living Trusts, when properly designed and implemented, can provide an impressive level of asset protection from the high cost of long-term care. And, like Revocable Living Trusts, they spare your family the delays, frustration and expenses of the probate process. Other reasons to utilize an Irrevocable Living Trust include:
- Tax minimization
- Avoiding the risks of placing assets in the name of your children
- Protecting assets against predators, creditors and lawsuits
While many different types of Irrevocable Living Trusts are available, in essence all of them retitle your assets. Assets placed in an Irrevocable Living Trust can include a business, cash, investments, life insurance policies, and more.
Why is an Irrevocable Living Trust better than a Revocable Living Trust at protecting assets against the cost of long-term care?
Under current Medicaid laws, assets in a Revocable Living Trust are not fully protected. Why? Assets in a Revocable Living Trust are available to the person who sets it up. Medicaid may determine that those assets must be used to pay for long-term care. This is not the case with an Irrevocable Living Trust, as long as it is properly designed and implemented to take into account the latest laws governing Medicaid eligibility. The timeliness of re-titling your assets to your Irrevocable Living Trust is also an important for Medicaid qualification. In New York state, the current lookback period is 5 years.
How does an Irrevocable Living Trust protect your children’s inheritance?
When you transfer assets directly to your children, they typically become outright owners of the assets. They also become responsible for the risks associated with owning the assets. A properly drafted and implemented Irrevocable Living Trust can avoid:
- Loss of inheritances due to lawsuits, divorce, remarriage, or the inability of your children to manage money on their own; and
- Negative tax consequences; and
To determine if an Irrevocable Living Trust is right for you and your family, contact us today for a consultation.
Please contact us today to schedule a time to discuss your estate planning needs.