Irrevocable Trusts Attorney
in Coeur d'Alene, Idaho & Los Angeles, California
The pandemic suddenly brought the issue of estate planning to the forefront of many people’s lives, especially the younger generations who traditionally put off planning for the future until later in life. A will, or last will and testament, is the word most frequently associated with estate planning – creating a legal document that will distribute assets to your loved ones when you’re gone.
Beyond wills, trusts accomplish the same designation of beneficiaries but with one big added advantage: they avoid probate court. Wills have to go through court proceedings to make sure all debts and taxes are paid and assets collected and appraised before beneficiaries can receive their gifts. The cost of probate comes directly from the estate, and delays the distribution of assets, proving both costly and time-consuming.
Trusts, since they avoid probate, can lead to a quicker distribution of assets. Trusts come in two basic types.
One is a revocable trust, meaning the grantor – the person who creates it – can amend or void the trust whenever he or she likes. The other is an irrevocable trust in which the grantor places assets in a trust and gives up control over them to a trustee. The trustee might be a family member, close friend, accountant, attorney, or even an institution.
The main advantage of an irrevocable trust is shielding the assets from estate taxes and from legal liabilities, such as lawsuits and bankruptcy.
If you’re considering the establishment of an irrevocable trust and you live either in Idaho or in the Los Angeles, California, region, contact Moses Estate Planning, PLLC.
We have offices both in Los Angeles and in Coeur d’Alene, Idaho, and are dedicated to helping clients with their estate planning needs. We will be happy to meet with you, discuss your financial situation, answer any questions you have, and advise you if an irrevocable trust is right for you.
Basics of Irrevocable Trusts
An irrevocable trust, as mentioned earlier, is one that cannot be modified or canceled by the grantor after creation, and the assets placed within the trust are then beyond the grantor’s reach. The person or institution named as the trustee has complete control over the assets placed in the trust.
Like a revocable trust, an irrevocable trust is used to name beneficiaries, so it serves the same function as a last will and testament in that regard, but will be administered outside of probate court once the grantor passes on.
Besides avoiding probate, one of the main advantages of an irrevocable trust is that it removes the assets from the grantor’s taxable estate, thereby relieving the grantor of any tax liability on income generated by the assets. It also provides a shield from creditor demands or other legal actions since the assets no longer belong to the grantor. Irrevocable trusts are thus useful for those who work in professions subject to lawsuits, such as doctors and attorneys.
Assets that can be placed in an irrevocable trust include, but are not limited to, businesses, investments, cash, real property, and life insurance policies.
Types of Irrevocable Trusts
Beyond just asset protection, irrevocable trusts can be used for specific purposes, such as caring for a family member with special needs, designating money for a charity, or even managing a life insurance policy.
SPECIAL NEEDS TRUST (SNT): If you or a family member is relying on government aid because of a disability or a physical or mental condition that requires dedicated care, the government places limits on how much income or assets the person with the special needs can have. Setting up an irrevocable trust to supplement the services provided by the government can shield the beneficiary from violating the asset and income limits established by the government programs.
CHARITABLE REMAINDER TRUST (CRT): This type of irrevocable trust is called a “split interest” trust in which you or your beneficiaries can receive an income stream for a fixed number of years and a charity you name can receive the rest of the assets. This allows for a tax deduction for the donation made.
IRREVOCABLE LIFE INSURANCE TRUST (ILIT): This is an irrevocable trust funded by a life insurance policy. The advantages are asset protection from courts and creditors and favorable tax considerations, as well as establishing safeguards so that the beneficiaries don’t squander the money. The trustee can be instructed on how and when to distribute the insurance benefits.
Do You Need an Irrevocable Trust?
An irrevocable trust provides some immediate and long-term tax benefits. Once the assets are transferred, any income generated will not become part of the grantor’s tax liability. Trusts can help avoid or reduce estate taxes.
The assets also will be largely shielded from creditors and lawsuits, though courts have sometimes ruled that hastily created irrevocable trusts – those done to avoid pending legal or creditor actions – are not valid.
Irrevocable trusts are also fairly complex and challenging to create, so you will have to work closely with an experienced and knowledgeable trust attorney to make sure your trust is airtight and up to all legal challenges.
Irrevocable Trusts Attorney Serving Coeur d'Alene, Idaho & Los Angeles, California
At Moses Estate Planning, PLLC, we will meet with you, evaluate your financial circumstances, and advise you on the best path forward to protect you and your loved ones. We have offices in Coeur d’Alene, Idaho, and Los Angeles, California. Reach out today for a free consultation. Your legacy is too important to not protect it.