The thought of giving up the control and management of your assets to a third party may have probably never crossed your mind. However, when making your estate plans, setting up an irrevocable trust should be something you should consider.
While you may not have a say when managing your assets, unlike with a revocable trust, there are several benefits to enjoy with an irrevocable trust, as detailed below.
Beneficiaries are still eligible for government programs
Government aid programs such as Medicaid or Social Security Disability Income (SSDI) come with strict requirements of the applicants’ financial status. With assets in an irrevocable trust, the beneficiaries can still be eligible for government assistance. The trustee can control the proceeds of the trust and ensure they do not interfere with the beneficiary’s eligibility to government benefits.
Minimize estate taxes
Since assets under a trust belong to the trust, they are not considered part of the grantor’s taxable estate. Therefore, it means that you will save taxes imposed on your estate as a whole after you pass.
If the beneficiary of a trust defaults on a debt, creditors cannot repossess assets in the trust since they technically don’t belong to the defaulter. In addition, assets under the trust are not subject to division following a divorce since they are not considered part of the marital estate. It can be a valuable tool in protecting the financial security of your heirs once you are gone.
Making the right call
Your intentions or objectives regarding your estate should inform the decision to set up an irrevocable trust. There may be no need to have your assets in the trust if you will not enjoy the benefits. In the end, making the right call is very important as it could save you a lot.