An irrevocable trust is a legal vehicle for holding and distributing assets over which you relinquish complete control. After opening the trust and designating a trustee and beneficiaries, you can place whatever you wish into the trust. But the trust now owns your assets; they do not count toward the calculation of your personal wealth, the value of your estate or any tax liability. This trust cannot be changed or canceled (revoked) except in certain circumstances under the laws of the state in which it was created.
Michelangelo Mortellaro is a Tampa, Florida asset protection attorney who can assist you will all manner of estate planning, including establishing an irrevocable trust. There are different types of irrevocable trusts, and some situations where they can be quite advantageous; there are other situations where they should be avoided. Mortellaro Law can advise you about the details of irrevocable trusts and if they would be helpful in your unique situation.
Types of Irrevocable Trusts
Irrevocable trusts are typed according to when they are created – when the grantor is alive or after the grantor has passed away. A trust that comes into being upon your death to hold and manage your assets is called a testamentary trust. It is irrevocable by nature, because you, the grantor, have died and are unable to make any changes.
All other irrevocable trusts are created while the grantor is living, and are sometimes called inter vivos trusts. Some common examples of these are:
- Irrevocable Life Insurance Trust – This trust is funded by a lie insurance policy and can be used to avoid taxes on certain funds.
- Special Needs Trust – Also called a supplemental needs trust, this trust is intended to benefit disabled beneficiaries by placing funds in the trust, which are not counted against the beneficiary for income limits in Medicaid or Social Security Income (SSI). The trust funds must be used for certain purposes.
- Charitable Trust – Holds assets that you transfer to the trust to benefit a charitable organization, and provides you, the grantor, with a tax deduction.
- Irrevocable Gift Trust – is given to another for use and provides the grantor a tax deduction.
- Grantor-Retained Annuity Trust – Allows the grantor to dictate the terms under which the beneficiaries receive the funds, such as when reaching a certain age. This trust can be written to save your heirs from paying taxes on trust funds.
Different irrevocable trusts are used as asset protection strategies for different reasons and in different situations. A Mortellaro Law asset protection attorney can explain the details of these and other types of irrevocable trusts and how each could benefit you.
Making Changes to an Irrevocable Trust
Laws exist in Florida that allow changes to irrevocable trusts, except in certain circumstances. Florida statutes 732 and 736 allow for judicial and non-judicial modifications to existing irrevocable trusts under specific circumstances which must be established by legal documentation. In most cases, permission from all listed beneficiaries of the trust must be obtained before any changes can be made. Asset protection attorney Michelangelo Mortellaro can explain more about this process and what is required for different circumstances in a confidential consultation in his Tampa office.
Benefits of Irrevocable Trusts
Irrevocable trusts can offer a range of benefits to both grantors and beneficiaries, which are why they are such a popular means of asset protection. Some of the main benefits are briefly discussed below.
Asset Protection from Creditors
Assets placed into a trust cannot be taken by creditors or those pursuing you in a lawsuit. They cannot be obtained for long-term care expenses. This is only true if the assets are already placed into a trust. Rapidly placing assets into a trust when you are being sued or when creditors already have claims against you is considered in Florida to be a fraudulent transfer of assets and is against the law.
Assets placed into an irrevocable trust cannot be counted as part of your estate. This can lower the value of your estate and help you, or your heirs, escape from heavy federal estate taxes. By selling assets in an irrevocable trust, the trust is considered as the seller, and pays any taxes, letting you avoid paying capital gains taxes on these sold assets. You may also fund a charitable trust while you are alive and receive tax deductions.
Other tax benefits exist for different trusts and these can be discussed further with an asset protection attorney from Mortellaro Law.
Should I Set Up an Irrevocable Trust?
Irrevocable trusts are by design difficult to change, hence the name. If you want to preserve your assets but still retain control or access to them, then other asset protection measures could be better options. Basically, irrevocable trusts are beneficial in certain circumstances, such as:
- You possess great wealth and need to reduce the value of your taxable estate
- You have a disabled dependent for whom you wish to establish ongoing financial security and care
- You are at risk of being sued and wish to protect your assets
- You wish to control how your assets are distributed to beneficiaries after your death
Tampa asset protection attorney Michelangelo Mortellaro is an experienced and knowledgeable partner who can create and manage your irrevocable trust. Call or message him online to schedule a consultation about managing your assets with an irrevocable trust.