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Skilled Oklahoma Estate Planning And Business Planning Lawyers

What to expect from an irrevocable trust

On Behalf of | Mar 28, 2024 | Estate Planning

The major benefit of creating a trust is exercising greater control over how and when your intended heirs receive their inheritance. However, your trust could still be at risk if you become the target of a lawsuit. This is why some individuals create an irrevocable trust.

A revocable trust is one you can change and modify at any time. The problem is that in the eyes of the law, you still possess the property in the trust, so creditors may try to claim it. By contrast, the law looks at an irrevocable trust much differently.

You give up asset control

Once you establish an irrevocable trust, you cannot make changes to it. This includes adding or removing beneficiaries or adjusting distributions. Also, while you select the trustee to manage the trust, you cannot remove that trustee or regain control over the assets once transferred to the trust.

You can guard assets against litigation

Since you no longer own the assets in the trust, those assets receive significant legal protections. Creditors cannot easily pursue assets held in an irrevocable trust to collect on debts or legal judgments against you. The trust shelters your assets from lawsuits or bankruptcy proceedings targeting you.

You can enhance long-term care planning

As you place assets in your trust, you reduce the wealth in your personal estate. This can help you if you plan to someday receive government assistance such as Medicaid.

Transferring assets to an irrevocable trust helps you meet the low asset and income thresholds for eligibility. This allows you to preserve and pass on those assets while still accessing public assistance for long-term care costs such as a stay at a nursing home.

You may minimize taxes

An irrevocable trust also removes assets from your taxable estate. This reduces your estate’s exposure to federal estate taxes when you pass away. Minimizing estate taxes preserves more wealth to pass to your beneficiaries.

Irrevocable trusts are not for everyone. Still, for people who work in high-risk jobs or other litigious circumstances, these trusts can be invaluable for protecting an inheritance.