Estate planning is important to your heirs. Whether they are family members, friends or charities that are important to you. With proper planning, you can give your heirs the maximum amount they are entitled to and avoid the long delays of probate. The best way to do this is by using a living trust. However, different kinds of trusts exist. You can choose from irrevocable trusts and revocable trusts. There are certain advantages to an irrevocable trust. The following are a few reasons to consider creating one.
To protect your assets from lawsuits
If you are involved in a profession where lawsuits are common, you may want to consider an irrevocable trust. Examples of these types of professions are those of doctors and lawyers. Even with insurance, there is no guarantee your personal assets are completely safe. When you create a trust that is irrevocable, you are transferring certain assets to another person who will inherit these assets after your death. You no longer own them, so they are not subject to any lawsuit. This is also true with creditors. Any debts that you will accumulate in the future, an irrevocable trust will be out of reach from creditor lawsuits.
To save money on estate taxes
Because you no longer own the assets that you have transferred to an irrevocable trust, they are not subject to an estate tax. Estate taxes are paid from the estate before they are transferred to the beneficiary. The beneficiary can save a significant amount of money. An inheritance tax may still be owed because this is assessed after the beneficiary receives their inheritance. But this tax no longer exists in many states, and those that have it, have many exemptions.
You are trying to qualify for Medicaid
If you are an elderly person in need of Medicaid, you may not qualify. In order to qualify, you must meet maximum standards for income and assets. If your income is low enough but your assets are over the limit, you can still qualify if you spend down these assets. There are certain assets than are exempt from the calculation of your total assets. After this, there are rules for what you can spend your excess assets on. One of these things is an irrevocable trust that is created for your funeral expenses. After your death, the assets in the trust are transferred to the funeral home that you have specified.
The three situations listed above illustrate that there can be advantages to creating an irrevocable trust. Trusts and other forms of estate planning can be complex, with laws changing from one year to the next. Make sure to consult professionals like Thomason & Hessmer for more help.