Irrevocable Trust
Ventura & Santa Barbara Irrevocable Trust Attorney
No estate plan is complete without consideration of the irrevocable trust. Families can use this powerful instrument to shield their assets, gain significant tax benefits, and ensure long-term financial support for their beneficiaries. Retaining an attorney to draft the terms of your trust is an important step in the estate planning process.
Find out why so many Ventura and Santa Barbara individuals and families turn to The Law Offices of Brian L. Fox, ALPC. We understand the nuances and complexities of irrevocable trusts and can help you make the most of these important tools.
What Is an Irrevocable Trust?
In general, a trust is a legal arrangement by which its creator (known as the grantor) gives another person (the trustee) the right to hold and manage certain assets for the benefit of third parties (known as beneficiaries). The trustee is considered to be a fiduciary, which means they have an obligation to act in the interests of others – namely, the beneficiaries.
An irrevocable trust is a specific type of trust that cannot be revoked or modified once it is established, except in very limited circumstances. This is in contrast to a revocable trust, which can be revoked or modified during the grantor’s lifetime. Once assets are transferred to the irrevocable trust, they are no longer considered the property of the grantor.
The Benefits of an Irrevocable Trust
It is this transfer of ownership from the grantor to the irrevocable trust that offers the bulk of the advantages of this type of trust. More specifically, you may wish to establish an irrevocable trust for these reasons:
- Protecting assets: The law does not consider assets that are held in the irrevocable trust to belong to the grantor. They are therefore typically protected from creditors and court judgments.
- Guaranteeing inheritance: By protecting assets in this way, the grantor can guarantee an inheritance for their beneficiaries. This protects beneficiaries from the grantor’s personal or financial mistakes.
- Tax benefits: In much the same way, these assets are not considered part of the grantor’s taxable estate. High-net worth individuals in Ventura and Santa Barbara can especially use the irrevocable trust to shield assets from taxing authorities.
- Medicaid planning: Since assets held in the irrevocable trust aren’t considered the grantor’s property, the grantor may be able to qualify for Medicaid as part of their long-term care planning. This is in recognition of the program’s strict asset limits.
- Providing for those with special needs: A certain type of irrevocable trust, known as a special needs trust (discussed below), can provide for certain beneficiaries without jeopardizing their eligibility for public assistance.
Examples of Irrevocable Trusts
An irrevocable trust can help Ventura and Santa Barbara families meet their unique estate planning objectives and protect what matters most. Consider a few common examples of irrevocable trusts:
- Irrevocable Life Insurance Trusts (ILIT): If you own a life insurance policy, you should explore an ILIT. The policy is placed in the trust, and its proceeds are thereby excluded from the grantor’s estate upon their death. This provides not only tax advantages but allows the grantor to specify how proceeds are to be used (e.g. to support beneficiaries).
- Qualified Personal Residence Trusts (QPRT): If you own a house in Ventura or Santa Barbara or you have a vacation home, the QPRT can hold the residence. The grantor can still live in the home for a certain number of years, after which it is passed on to beneficiaries and usually at a reduced tax cost. There are both gift tax and estate tax benefits to this approach.
- Charitable Remainder Trusts (CRT): A CRT provides a guaranteed income stream to the grantor or beneficiaries for a specified period of time, after which the remainder of the assets are given to a charity. The grantor can support their desired charitable causes and may receive an income tax reduction upon creating the trust. The CRT can turn appreciating assets into income without incurring immediate capital gains taxes.
- Special Needs Trusts (SNT): These are designed to support beneficiaries with disabilities without compromising their eligibility for government assistance programs like Medicaid or Supplemental Security Income. A trustee manages assets in the SNT for the benefit of the special needs person. This allows the SNT to pay for expenses that the government programs do not cover.
How an Attorney Can Help
If you reside in Ventura or Santa Barbara, and you either do not have an estate plan or it’s been a while since you have reviewed it, let the team at The Law Offices of Brian L. Fox help. Individuals from all walks of life use irrevocable trusts, especially those who:
- Have or may have creditor claims or judgments against them that could threaten their assets
- Want to provide an inheritance to beneficiaries with the added peace of mind that comes with asset protection
- Have a loved one who has special needs or medical conditions that may qualify them for public assistance
- Are concerned about meeting long-term care needs and qualifying for Medicaid
- Are high-net worth individuals wishing to protect more of their assets from taxes and creditors
- Own a life insurance policy or home
- Need a guaranteed stream of income
- Want to use their assets to support a charity
Contact Our Ventura & Santa Barbara Irrevocable Trust Attorney
We can assist with these and other individuals by reviewing their exact goals and then creating a personalized irrevocable trust to meet them. Our firm understands estate planning laws and how to protect the interests of individuals and families. Call or complete our online contact form today to schedule your consultation with our Ventura or Santa Barbara office.
Frequently Asked Questions About Irrevocable Trusts
Why can’t I shield assets and reduce estate taxes with a revocable trust?
With a revocable trust, assets are still considered the property of the grantor. That means creditors could still claim them, and they are counted against the grantor for tax and Medicaid planning purposes. You will need an irrevocable trust to accomplish these desired goals.
What are some drawbacks to the irrevocable trust?
One of the major disadvantages to the irrevocable trust is its inflexibility: once created, it is nearly impossible to modify or revoke. This leads to another drawback, the difficulty of accessing trust assets in the event of an emergency. Talk to our Ventura and Santa Barbara estate planning firm to weigh the pros and cons of these trusts.
Who can serve as a trustee?
The grantor can appoint nearly any individual, or a financial institution like a bank, to serve as trustee. In selecting a trustee, you will want a responsible person who understands their role as a fiduciary. Basic trustee responsibilities include managing trust investments, distributing assets to beneficiaries in accordance with the trust’s instructions, and filing trust tax returns.
