Estate planning attorneys develop irrevocable trusts to achieve a wide variety of goals. While an irrevocable trust provides unmatched asset protection, that protection comes at a cost.
Irrevocable trusts operate very differently from the revocable living trusts commonly used to avoid probate. The team at Blacksburg Law can design an irrevocable trust to help you avoid unnecessary estate tax liability, preserve eligibility for certain benefits, protect assets from creditors, and a number of other purposes. We also assist with the management and administration of trusts to ensure that all legal requirements are fulfilled. We want you to be able to enjoy all the benefits your trust has to offer.
Understanding Trust Operation
It is often easiest to think of a trust as a virtual container that can hold all types of property. Trusts are legal entities created to hold property for the use of individuals referred to as beneficiaries. The beneficiaries are often individuals who are not prepared to manage their own money, such as minors or those who lack discipline with financial resources.
Property in the trust is managed by the trustee, which can be an individual or an organization. Trustees have a legal fiduciary duty to make decisions that serve the best interests of the trust and the beneficiaries, rather than their own personal interests.
Although trustees have responsibility for assets in the trust and act as owners in a way, the property does not belong to them and it is not intended to be for their use. Trustees are caretakers of the property. They are obligated to follow the terms in the trust document, which usually involves disbursing funds to the beneficiaries. For instance, if a trust is set up to pay for the education of a grandchild, the trustee might send payments to a college each semester for tuition, room, and board. Or for a special needs trust, the trustee might pay for a laptop or phone requested by a beneficiary.
Get In Touch
Fields marked with an * are required
What it Means When a Trust is Irrevocable
When a trust is irrevocable, the person who transfers property into the trust loses control of it permanently. This is the exact opposite of a revocable living trust used to avoid probate. In addition, the terms of an irrevocable trust can be very difficult to change, so transferring property into an irrevocable trust is a permanent commitment.
The lack of flexibility is what makes an irrevocable trust so powerful. Since property in the trust no longer belongs to the original owner, creditors cannot take it. (However, creditors can usual attach distributions from the trust to the creator.)
The same holds true for the beneficiaries. Their creditors cannot access property in the trust, however, any distribution to a beneficiary can be attached by the beneficiary’s creditors.
The bottom line is that an irrevocable trust takes control and ownership away from the grantor and the beneficiary, a feature which offers both advantages and disadvantages. Before establishing an irrevocable trust, the experienced team at Blacksburg Law can review the operation with you so that you understand whether the trade-off makes sense in your situation.
How Irrevocable Trusts Can Be Used
Estate planning attorneys set up different types of irrevocable trusts to accomplish various purposes. Some examples include:
- Spendthrift trusts to protect assets of those who are still developing financial maturity
- Special needs trusts to provide resources to individuals with special needs without interfering with eligibility for government benefits
- Asset protection trusts to insulate assets from risks of potential lawsuits
- Charitable lead trusts and charitable remainder trusts to support worthy causes, benefit loved ones, and reduce tax liability
- Education trusts to pay for college for a loved one
- Residence trusts to reduce estate tax liability
- Pet trusts to provide care for beloved animal companions
- Medicaid asset protection trusts to remove assets from consideration for long-term care benefit eligibility
To accomplish their intended purposes, the trust terms and ongoing operation must often comply with specific government rules. This can make the role of a trustee quite challenging, so the creator of the trust may choose to designate a professional to serve as trustee.
Find Out if an Irrevocable Trust is the Right Choice to Meet Your Goals
An irrevocable trust can provide numerous benefits, but it is not necessarily the best choice for your particular situation. The team at Blacksburg Law would be happy to talk to you about the advantages an irrevocable trust could provide for your family and to help you develop terms tailored to your specific goals. Just schedule an appointment to get started.
Estate Planning Basics
A START-UP GUIDE TO ESTATE PLANNING
Download our Estate Planning Basics PDF Guide to get more information about what estate planning is, how it works, what you need to consider, and why Blacksburg Law is the right partner for you.
Let’s start the conversation
Working with us starts with a conversation.