Do I Need an Irrevocable Trust?
When was the last time you reviewed your estate plan? An even more broad-reaching question; do you even have an estate plan? If your answer to this question is “I don’t know” or “No”, you need to take a look at your estate plan or look into setting one up. Irrevocable trusts are becoming popular parts of estate plans across the United States and for very good reasons.
First, the irrevocable trust protects you and your spouse’s assets from going to probate. This is because the property is not technically under your control, but under the control of the trustee of the respective irrevocable trust. If your estate is over your state’s threshold for a small estate exemption, an irrevocable trust is the best way to ensure that your estate doesn’t go to probate. Placing real property, houses, vehicles, or other valuables in an irrevocable trust affords the extra protection that a will cannot.
Another benefit of the irrevocable trust is the extremely beneficial protection of your assets from Medicare and Medicaid costs. Without an irrevocable trust, if an individual’s long term healthcare or nursing home is paid for by public funding, the government can seek the amount they paid for your healthcare from your estate. However, if the property sits within the irrevocable trust for a five-year lookback period, the assets are unobtainable by the government. This means that after five years and one day from the signing of your trust, your assets are unobtainable from the government and are almost guaranteed to pass on to your chosen beneficiaries.
However, there is one noticeable drawback of an irrevocable trust if one wants to receive the above-mentioned Medicare and Medicaid benefits. That drawback is the grantor is not allowed to serve as the beneficiary and the trustee of the irrevocable trust. This is simple when you think about why it doesn’t work; because the beneficiary still has control over the assets as trustee! Therefore, it’s important to select a trustee that you, well, trust (pun intended). Family members are always a good choice, but professionals that already owe a professional duty are also an option (i.e attorney or CPA).
The professionals at The Center for Financial, Legal and Tax Planning are more than well-equipped to answer your questions with regards to an irrevocable trust or any other estate planning questions. Please contact us at (618) 997-3436 to setup a free consultation.