Divorce Lawyer Midvale Utah: Irrevocable Living Trust

You don’t need to have deep pockets to benefit from a living trust, just a desire to provide for the people and causes you care about. Maybe you want to guarantee income for a family member with special needs, or you want to pay for your grandchildren’s a college education. There are countless reasons to create a living trust and dozens of types of trust to select from.

Generally, when people talk about living trusts, they’re referring to revocable living trusts. With a revocable trust, the person creating the trust retains control of the trust property and frequently serves as the trustee. In contrast, irrevocable living trusts can’t be terminated and the grantor gives up complete control over the trust property.

So why would you want to give up complete control of your property to an irrevocable living trust? These trusts have tax advantages that revocable trusts just don’t provide. Irrevocable trusts also shield assets from creditors, and help provide for family members who benefit from not receiving a single, large gift.

Understanding Irrevocable Living Trusts

Creating an irrevocable trust is a serious decision. Even though you’ll give up control over the trust property, you do have control over the rules that govern the trust and you can determine the uses of the trust assets. You determine who serves as trustee and name the beneficiaries. You can even retain the right to change beneficiaries.

The key features of irrevocable trusts are reflected below:

No Modifications: Once you create the trust, it can’t be changed or modified.
Personal Tax Benefits: When appreciated assets, such as stock and real estate, are transferred into the trust, the grantor will save on capital gains taxes. An irrevocable trust doesn’t avoid taxes entirely.
Property Ownership: Once you place property into an irrevocable trust, it no longer belongs to you.
Asset Protection: Property placed in a trust is generally shielded from outside creditors, liens and even divorcing spouse.
Long-Term Care: Moving assets to an irrevocable trust allows the grantor to obtain Medicaid benefits if he moves into a nursing home: By placing assets into an irrevocable trust five years ahead of the actual need, the grantor has secured his assets for the benefit of named beneficiaries.
Trustees: Unlike a revocable trust, the grantor cannot serve as the trustee of an irrevocable trust.
Estate Tax Savings: Since the grantor no longer owns the property, it’s not included in tax calculations of the total value of property at the time of death.

Types of Irrevocable Living Trusts

There are many reasons to create an irrevocable living trust, ranging from the long-term care of a disable beneficiary to shielding a home from estate taxes. A few of the more common irrevocable trusts are described below:

Bypass Trust

Also referred to as a family trust. It’s designed to help a family save on estate taxes and can be used to provide income to your spouse or other family members during the surviving spouse’s lifetime. You and your spouse will each have provisions in your wills directing personal assets, not community property, be used to fund the trust. Examples of assets used to fund these trusts include assets already in a revocable living trust, or proceeds of a life insurance policy or retirement account that names the bypass trust as beneficiary.

Irrevocable Life Insurance Trust

This is one of the most frequently used estate planning tools because of the tax savings benefit. The tax rules are complicated but by excluding the life insurance assets from the insured’s estate, this trust can more than double the amount of policy proceeds payable to heirs.

Special Needs Trust

Typically, people with disabilities qualify for government assistance such as Supplemental Security Income (SSI), Medicaid, vocational rehabilitation, and subsidized housing. If these beneficiaries were to receive an outright gift, it could jeopardize their government benefits. Income from the trust can be used to pay for housing, assisted-living arrangement, education, training, vacations, professional services, as well as vacations and hobbies.

Qualified Person Residence Trust

Also known as a QPRT, the grantor transfers title to their home to the trustee of the trust but keeps the right to live in the home rent-free for a term of years called for by the trust. The grantor continues to pay all the ordinary expenses. At the end of the term, if the grantor is still living, the residence passes to the beneficiaries, usually the grantor’s children.

Spendthrift Trust

This estate planning tool is designed to protect a beneficiary from wasteful spending that may rapidly exhaust their assets. The assets are generally creditor judgments or any attempts to attach or lien against the beneficiary’s trust interest.

Charitable Remainder Trust

This trust provides for distributions to at least one non-charitable income recipient for a set number of years, with the remainder paid to at least one charitable beneficiary. It allows you to donate generously while receiving tax benefits.

Free Consultation with a Utah Estate Lawyer

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