By Orange County Asset Protection Attorney Darlynn Morgan
Irrevocable trusts are almost certain to come up when you talk about estate planning and asset protection planning strategies with an attorney. These special types of trusts are used by estate and elder law attorneys to protect property and assets from lawsuits, creditors, predators and even nursing homes, which can end up saving their clients thousands of dollars. As you begin your estate planning and asset protection planning journey, here are three things you should know about irrevocable trusts.
They’re here for good
Just one look at the name of an irrevocable trust tells you all you need to know: it cannot be terminated once it is created, which is what makes it different from a standard revocable trust. The reason why this type of trust cannot be revoked is because of the many benefits it grants to protect assets and shield the grantor, or trust creator, from heavy tax burdens. While a revocable trust is best used to avoid probate and allow successor trustees to manage affairs when the grantor dies or becomes incapacitated, an irrevocable trust is mainly used for asset protection purposes.
There are differences between living and testamentary trusts
There are actually two types of irrevocable trusts: living and testamentary. A living trust takes full effect and becomes irrevocable as soon as it is initially created and funded. This means that the trust is irrevocable as soon as the ownership of assets moves from the grantor to the trust, holding the same irrevocable status whether the grantor is alive or dead. A testamentary trust only becomes irrevocable after the grantor dies. The terms of the trust can be changed up until that point, but once the grantor passes away, they’re locked in. Most revocable trusts become irrevocable when the grantor passes away, while other testamentary trusts are created through the Last Will and Testament.
There are several types of irrevocable trusts
Irrevocable trusts are designed to save the grantor money, either by reducing taxes or protecting assets. There are several types of irrevocable trusts that can be used depending on an individual’s situation and the goals they want to accomplish. It’s important to be open and clear with your attorney about your wishes for your assets, your family and your goals for the future, as the answers to these questions will help him or her determine which specific type of trust is best suited to meet your needs.
If you’d like to learn more about irrevocable trusts, or if you’d like to have your current estate plan or asset protection plan reviewed by an experienced estate and asset protection attorney, please call us at (949) 260-1400 to schedule an appointment.