When are Irrevocable Trusts Needed?
Sometime during the last decade, irrevocable trusts started to gain traction in estate planners as a way to save on estate taxes. A trust is created when one party is given power of attorney over another’s money. The important thing to remember about irrevocable trusts is that they are not irreversible and can be revoked at any time. While an irrevocable trust can drastically simplify and lower the cost of an estate plan, it should only be used when absolutely necessary.
You should speak to a trusts planning attorney in San Antonio before you decide to move on with irrevocable trust. A lawyer will be able to tell you when you will need one. By understanding the benefits and necessity of irrevocable trusts, you can make a more informed decision on whether or not an irrevocable trust is right for your situation.
Here are 3 reasons for you to consider an irrevocable trust.
1. Minimizes the burden of estate taxes
Many families choose irrevocable trusts as a way to lower their tax burden now and avoid paying higher taxes later on. After a person dies, the estate must pay estate taxes on all money the deceased had in their possession at the time of death. This can include money from bank accounts, real estate, and retirement accounts.
When a person dies and their estate is structured using an irrevocable trust, the assets in that trust and any income earned from it are no longer included in the estate, which means there is less money to be taxed.
2. Helping those with disabilities qualify for government benefits
An irrevocable trust can be a very useful tool in assisting those with disabilities in receiving government benefits. This is important because someone with a disability who has low or no income could lose their Medicaid benefits if they were to receive money from an estate settlement.
While the money that is given to the income beneficiary through irrevocable trust can be accessed at any time, it does not count towards the individual’s gross income. The individual will still be eligible for all government programs and social security.
3. To protect your assets from lawsuits
An irrevocable trust can be useful in case a court decides to try and take away your assets. If you have made changes to your will that were not well thought out, it is possible a court would rule that the trust does not fit within the new parameters of what is considered estate planning. When you have an irrevocable trust, the money that was in your name is no longer counted toward your estate. This means you will have less money to fight a lawsuit with.