When you are estate planning, one option that you have is an irrevocable trust. A revocable trust is more desirable in most cases because you still retain some ownership of your assets. However, there are cases where only an irrevocable trust will meet your planning needs.
An irrevocable trust transfers your assets to your trust, and you do not retain ownership. You legally remove your rights to these assets, and you cannot change the terms without permission from the trust’s beneficiaries.
You are in a high lawsuit profession
Doctors, lawyers and other professions that suffer from frequent lawsuits benefit from these types of trust. Since all of your assets are in the trust, they are virtually untouchable in a lawsuit. Since a trust cannot be a party in a lawsuit, it will be safe from judgments.
You want to avoid some taxes
An irrevocable trust can help you by removing taxable assets from your estate. Once you remove it, it does not count when they calculate the gross value of your estate.
You don’t want your assets misused
You can set up rules for the distribution of your assets. This keeps beneficiaries from misusing your assets since they can only use them in ways you dictate.
You can receive government benefits
Some government benefits like Social Security Income and Medicaid are asset-based. Once certain assets are out of the equation, your assets are lower, and your eligibility increases. This is particularly helpful when it comes to nursing home care provided by Medicaid.
Although irrevocable trusts have some drawbacks, they are highly beneficial in these situations.