Idaho Estate Planning Should I use an Irrevocable Trust in My Estate Plan
By Lane V. Erickson, Idaho Estate Planning Attorney
The job of a good estate planning attorney is to help each client understand the options that exist to help them accomplish what they want to do with their own personal estate plan. As an estate planning attorney in Idaho I firmly believe that each person should have at least a basic estate plan that would consist of a last will and testament, a durable power of attorney, a living will, and a power of attorney for health care. Additionally, many of my clients also benefit greatly from having a trusts
At the Racine law office our team of premier Idaho estate planning attorneys work to determine what your specific needs are when it comes to using a trust as part of your estate plan. Our team of skilled lawyers consists of partners Randy Budge and Lane Erickson and attorneys Nate Palmer and Dave Bagley. Each of our lawyers have earned the highest rankings possible based upon their experience, knowledge, abilities as well as their ethics from the several notable legal rating services including AVVO, Martindale & Hubbell and Justia.
Of all the different kinds of trusts that exists one of the choices is using an irrevocable trust as part of your estate plan. The purpose of this article is to explain the limitations of using an irrevocable trust. We also discuss the three specific reasons that an individual might actually need to use an irrevocable trust after all. In providing this information, our goal is to help educate you about how an irrevocable trust may affect your own personal estate planning.
Before we talk about the ways that an irrevocable trust can actually help your estate-planning we are going to start with the negatives when it comes to using an irrevocable trust. Before you make a decision about why you should use an irrevocable trust it's important to understand the many ways that this could be harmful to your estate plan.
The first thing about an irrevocable trust that you should understand is exactly what its name implies, that it is completely irrevocable after it is set up and funded. In other words, the person who creates the trust cannot alter, amend, or revoke the trust once it has been funded and it is operating. This obviously reduces the flexibility of the estate planning that you may be able to accomplish.
When you keep in mind that the purpose of estate planning is to protect you while you were alive and provide a plan of distribution for your money, property, and assets, after you die, an irrevocable trust may not be ideal. The reason for this is that your circumstances may change during your lifetime. As a result of this, it may be necessary for you to make changes to your estate planning to meet the needs that exist in your life at the time that you pass away. An irrevocable trust does not allow you to do this. Rather, once the irrevocable trust is set up, it is like concrete. It becomes unchangeable even if the circumstances in your life actually do change. It's for this reason that a person should seriously consider whether in fact an irrevocable trust is a good idea to use in their estate planning.
Having discussed the fact that an irrevocable trust is inflexible, we are now ready to talk about why an irrevocable trust may be helpful to you in your life. In fact, there are three specific reasons that an irrevocable trust becomes a useful estate planning tool. These three reasons are discussed below.Eligibility for Government Benefits
The first major reason that using an irrevocable trust may be helpful as part of your estate planning is if you or some other individual that you want to benefit from the trust needs to maintain eligibility to receive government benefits. The need for either you or another person to need government benefits may come about in a couple of different ways. For example, an individual may be disabled and may be unable to work. In this instance, the benefits that this person would receive would be disability benefits which would be based on fundamental Financial need. The requirements for eligibility are that an individual must be limited in the income, or financial resources they have available to them, and which they have control over. In this instance, an irrevocable trust may be a wise part of an estate plan that can provide supplemental benefits to this individual to help with needs that arise and which the government benefits do not cover.
This leads to another reason that these benefits may be necessary. This has to do with old age, and the need to be placed in a rest home, or an assisted living center. In this instance, Medicaid is the government benefit that steps up to assist and help pay the cost of this type of facility. If an individual has their own finances, or other resources available to them, over which they maintain control, they will not be eligible to receive the Medicaid benefits. In this way, and irrevocable trust allows a way for a family to provide supplemental help to this individual without jeopardizing their receiving these types of governmental benefits.Reducing Estate Taxes
In addition to allowing government benefits to be available, an irrevocable trust also is a tool often used by wealthy individuals to help reduce estate taxes. Based on the tax reform introduced by President Trump, a couple would have to have an estate worth more than 22 million dollars, and an individual would have to have an estate worth more than 11 million dollars, before the federal estate tax would be applicable. However, for individuals who have large estates, creating and using irrevocable trusts, which permanently divest ownership of property from the estate, may be a tool that can be used in order to reduce or avoid the application of estate taxes when an individual dies.
Additionally, some individuals will create an irrevocable life insurance trust that will receive the benefits of the life insurance policy and will pay those benefits to third-party beneficiaries so as to avoid estate taxes. Charitable remainder trusts are also often used for this purpose.Asset Protection
The final reason that irrevocable trusts are often used as a part of estate planning are to completely protect assets that are owned by an individual. When a revocable trust is used, the assets that are placed in the revocable trust are not protected from the creditors of the individual who created the trust. However, when an irrevocable trust is used, the individual has divested ownership and control of the assets when they were placed in the trust. As a result, these assets are protected from creditors.
While the roles and uses of an irrevocable trust as part of an estate plan are limited, sometimes they are appropriate. We have helped numerous individuals create various kinds of irrevocable trusts as part of their estate plan and we are confident that we can answer your questions and help you too.Enlist an Idaho Estate Planning Attorney to Help You
Our team of Idaho lawyers can help you with any of your estate planning or probate needs. Whether you are seeking to create or review an estate plan for yourself or would like to help a loved one, we are available to discuss your options and answer your questions at an initial consultation. Call us toll free at 877.232.6101 or 208.232.6101 for a consultation. You can also email us directly at firstname.lastname@example.org or stop by our office at 201 East Center Street, Pocatello, Pocatello 83201. We will answer your questions and help you solve your Idaho Estate Planning problems.