Benefits and Drawbacks of an Irrevocable Trust

 Posted on August 09,2022 in Estate Planning and Probate

When you decide to create a trust, you will have two main options—revocable  or irrevocable. Revocable trusts are more common. Having the ability to go back and make changes very easily appeals to a lot of people. The term “irrevocable” can scare people off easily. Because most people transfer all or almost all of their property into their trusts, a lot of people are afraid to create a trust they cannot revoke. However, there are a few distinct benefits of using an irrevocable trust. 

The big reason that people who do use irrevocable trusts do is for the unparalleled asset protection features. Of course, an irrevocable trust is not without risks. If you are considering using an irrevocable trust, your attorney can help you decide whether this is the right move. 

Benefits of an Irrevocable Trust

The benefits of using an irrevocable trust include: 

• Public benefits - A lot of public benefits, like Medicaid and Supplemental Security Income, are only offered to those who do not have enough assets to meet their own needs. If your irrevocable trust owns your assets, then you do not. Therefore, no property contained in the trust can be counted against you for purposes of qualifying for benefits. 
• Asset protection - If you cannot willingly reach into your trust and take money out to pay something like a lawsuit settlement, then neither can the person who sued you. If you or any of your beneficiaries are in a profession that carries a high risk of getting sued, this benefit alone may be worth it. 
• Tax benefits - If you have a very high-value estate, using an irrevocable trust can lower your estate’s tax burden so that your beneficiaries - not the government - will keep a higher share of your estate. 

Drawbacks of an Irrevocable Trust

Creating an irrevocable trust does have some drawbacks, such as loss of control. Once you place assets into an irrevocable trust, you cannot easily simply remove them and take them back. Managing the trust may be more difficult as you cannot simply sell off trust property for your own personal benefit. For this reason, you may not want to put all of your assets into the trust. It may be wiser to keep some property separate so that it is there and under your personal control if you need it. 

You will also have a very hard time making changes to the trust. However, an irrevocable trust is not completely irrevocable - under the right circumstances, there may be legal mechanisms for making changes. Your lawyer can help you keep some degree of flexibility in an irrevocable trust. 

Call a Texas Trust Lawyer

Geoff Mayfield, Attorney at Law is skilled at helping clients create the trust that is going to work best for them. Our experienced Bexar County trust attorneys will help you understand all your options and come to the right decision. Call 210-535-0870 for a free consultation. 

Source:

https://statutes.capitol.texas.gov/Docs/PR/htm/PR.112.htm