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Home >> When Should I Use an Irrevocable Living Trust?

When Should I Use an Irrevocable Living Trust?

May 16, 2016 by Robert Kulas.

shutterstock_46713349A trust is one of the most popular additions to any comprehensive estate plan. Before you can decide if a trust is right for you estate plan, however, you need to understand how they operate and which type of trust is best for which type of estate planning goal. For example, when should you use an irrevocable living trust? The best way to determine which type of trust is best for your estate plan is to consult with an experienced Florida estate planning attorney; however, in the meantime it may help to learn a bit more about irrevocable living trusts.

Trust Basics

All trusts are broadly divided into two types – testamentary and inter vivos, or living, trusts. A testamentary trust is a trust that does not become active until your death. A living trust, as the name implies, is a trust that becomes active during your lifetime. All trusts, however, share the same basic elements, including:

  • Settlor – the Settlor, also referred to as the “Maker”, or “Trustor,” of a living trust is the person who creates the trust.
  • Trustee – the Trustee is responsible for administering the trust which includes abiding by the trust terms and distributing the trust assets pursuant to those terms.
  • Beneficiary – every trust must have at least one beneficiary, although a trust may have many beneficiaries. A beneficiary can be an individual, an organization, or even the family pet. Beneficiaries can be current or future, meaning they receive benefits now or in the future.
  • Trust terms – the Maker of a trust establishes the terms of the trust. As the Maker, you may include almost any terms you wish as long as they are not illegal or unconscionable.
  • Funding – a trust must have sufficient funding to accomplish the trust purpose. Funding may include almost any type of assets, such as cash, securities, or real property.

Revocable vs. Irrevocable Trusts

Living trusts are further sub-divided into revocable and irrevocable living trusts. A revocable living trust can be modified or revoked by the Maker at any time and for any reason – or for no reason at all. An irrevocable living trust cannot be modified or revoked by the Maker once it becomes active. Modifying or revoking an irrevocable living trust can usually only be done with court approval, and then only for a very good reason. Because it does not activate until the death of the Settlor, a testamentary trust is always a revocable trust until it takes effect at which time it becomes an irrevocable trust. Living trusts, on the other hand, can be revocable or irrevocable at the time of their creation.

When Is an Irrevocable Living Trust Preferable?

The type of trust you create will depend on the purpose of the trust. For some goals, such as incapacity planning, a revocable living trust works better. For other goals, however, an irrevocable living trust is the answer. Examples of when an irrevocable living trust works better include:

    • Medicaid planning – if there is even a chance that you will not be able to pay the high costs of long-term care when you are older out of pocket — as is the case for the average person – you need to plan ahead to ensure that you will qualify for Medicaid, which will cover the costs. To qualify, however, the value of your assets must not exceed the very low program limits.  One way to protect your assets and set yourself up for eligibility is to create a Medicaid trust. A Medicaid trust is an irrevocable living trust into which you transfer your assets. Although you can no longer benefit directly from the assets you can receive the interest earned on them.

 

  • Asset Protection — once an asset is transferred into an irrevocable living trust it becomes the legal property of the trust. As such, you no longer have a legal ownership interest in the asset. If asset protection is your goal, this results in protecting the asset because if you no longer own the asset it is not vulnerable to things such as  creditor claims, bankruptcy, or divorce.

 

Contact Us

For additional information, download our FREE solid estate plan checklist.  If you have additional questions about irrevocable living trusts, or estate planning in general,  in the State of Florida please contact the experienced estate planning attorneys at Kulas & Crawford. by calling 772-398-0720 to schedule an appointment.

Filed Under: Wills and Trusts

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Everyone treated us extremely well.  Robert explained how a trust works and the benefits of having one.  We decided to move forward and complete the process.  He was very kind and knowledgeable.  Julie was also very helpful and very patient with our questions.  We felt very comfortable with this firm handling our affairs.  We would highly recommend this firm to our friends and family.

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"Everyone treated us extremely well.  Robert explained how a trust works and the benefits of having one.  We decided to move forward and complete the process.  He was very kind and knowledgeable.  Julie was also very helpful and very patient with our questions.  We felt very comfortable with this firm handling our affairs.  We would highly recommend this firm to our friends and family."

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Janice M
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Robert Kulas and staff made making a will an easy to understand process. They were very knowledgeable and attentive to my wishes. All my documents were provided in an organized binder which will be a great asset to my family. I would definitely recommend them.

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Krissy L.
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I have worked with Mr. Kulas & staff before. And they are very professional. I am very satisfied with Mr. Kulas and his staff and give them the highest satisfaction and 5 star rating.

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Leo C.
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Mr. Kulas and his staff have been extremely helpful & knowledgeable for the over 3 years we have been associated. They are easy to talk to and explain everything without feeling rushed. Very competent and professional.

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Mildred W.
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August 25, 2020
    

I have known Robert Kulas for 20 years since I was co-executor for friends who had Mr. Kulas prepare a Trust for them. When I felt I needed a trust also, I came to him. I have always been completed satisfied with his work and that of his charming, competent staff.

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Joan C.
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We began our estate plan process in 2004 (12 years ago) and have been pleased with the periodic reviews we have gone through and when changes have been needed the firm has been thorough and professional in making those changes.

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