What are and how do Irrevocable Trusts work?

What is a trust? A trust is way for you to give another person (the trustee of the trust) the right to hold title to property or assets for the benefit of a person (child, grandchild, friend, etc.) or organization (church, school, non-profit, etc.). A trust is a legal entity you can use in estate planning to give your assets (cars, boats, real estate, furniture, jewelry, etc.) to a person or organization or provide for the needs of a family member or friend. A trust is simply a set of written instructions for giving an asset(s) to a person or organization and how and when the asset(s) will be distributed to the person or organization and what the asset(s) can be used for. For a trust to be legally binding, you must follow the laws of your state when creating the trust.

Trusts can be revocable or irrevocable. What is a revocable trust? A revocable trust is a trust you can change at any time during your life. You retain full control of the assets in the revocable trust. You can add or remove assets from the trust or change the people or organization that are to receive assets upon your death. You can even eliminate the trust if you decide you no longer need the trust.

What is an irrevocable trust? An irrevocable trust is a trust that cannot be changed once it is established. With an irrevocable trust, you give up control of the asset(s) placed in the trust. Once you transfer ownership of an asset into an irrevocable trust, you cannot remove it from the trust. You also cannot change beneficiaries (person or organization receiving the asset(s) or benefit(s) or change or eliminate any of the terms of the trust.

If you have a high net worth, you may want to talk to an advisor with the American Society for Asset Protection to see if an irrevocable trust may be used as a part of your estate plan to protect your assets against lawsuits and reduce your taxes. If you have a modest net worth, you may still utilize an irrevocable trust as a part of your Medicaid plan and asset protection plan. We recommend you talk with the American Society for Asset Protection so an attorney can provide you with information specific to your assets, goals, age, and the state in which you live.