Advantages of an Irrevocable Trust in Naples, FL
When considering your estate plan, there can be advantages of an irrevocable trust. It can provide you with solid protection for your assets while offering certain valuable protections. Creating an estate plan in Florida takes careful consideration and knowledge, and knowing if you should have an irrevocable trust will require the advice of an experienced Naples based estate planning attorney like Jim Nici. In Florida, where so many choose to retire, an irrevocable trust offers distinct peace of mind for residents of the Sunshine State. In general, trusts are a way to reduce tax burdens and avoid assets going through probate.
What Makes a Trust Irrevocable or Revocable?
Just as the term suggests, an irrevocable trust does not allow you to make any changes. Basically, when an irrevocable trust gets created, the details cannot be changed. Even if the person who created the trust, the grantor, wants to make changes, the terms of the irrevocable trust will not allow you to make changes. So you and your estate planning attorney need to create your irrevocable trust with your wishes and parameters in mind.
Under Florida law, the terms of an irrevocable trust operate with the understanding that the terms of the trust will not go into effect until you have passed on. It may help to think of an irrevocable trust as the grantor’s final plan, leaving no room for suggestions or edits. Assets in the trust are distributed according to the requirements outlined by you, as your final wish. Your irrevocable trust cannot be modified after it is created without the beneficiaries’ consent.
By comparison, a revocable trust, sometimes called a living trust, is a trust in which the terms can be changed at any time.
Advantages of an Irrevocable Trust
So if you, the grantor, cannot change the terms, what advantages does an irrevocable trust provide? After all, it may seem an irrevocable trust would remove the your ability to adapt to new circumstances.
Irrevocable trusts work best when used to address future concerns that will most likely not change, such as health care concerns or cost of living expenses. Even if the beneficiaries named in a trust win the lottery or find themselves the unexpected recipients of a life-changing fortune, an irrevocable trust can still provide methods to handle their future needs.
Some advantages of an irrevocable trust include:
Reduce, or possibly eliminate, the estate taxes owed for a given property by removing that property from the taxable estate. Basically, a trust could essentially move the property into a legal “No Estate Tax” zone, although certain legal requirements would have to be met to make that happen.
Reduce taxes. A properly created trust can avoid some capital gains tax. Trusts do qualify for a capital gains tax discount, but there are some rules around this benefit. An irrevocable trust can be designed so that you can be relieved from some of the tax liability from the income generated by the assets. These trusts offer tax-shelter benefits that revocable trusts do not. It is important to consult a tax or estate attorney’s guidance when using an irrevocable trust.
Beneficiaries maintain eligibility for medical care benefits. This can be an important advantage in Florida, where the costs of medical care and services are a huge factor. If your beneficiary fears losing their eligibility for medical care because of the inherited assets, irrevocable trust allows them to transfer and/or receive the assets without losing their program eligibility.
Defense from Creditors. In keeping with the idea of legal protection for assets, an irrevocable trust can protect assets from creditors seeking to settle debts of the grantor, the person who has passed away and was creator of the trust. This advantage can block creditors from claiming assets inherited by the beneficiaries as a way to settle the grantor’s debts. The assets in the trust can not be touched by creditors.
In general, trusts, whether irrevocable or revocable, can be a valuable part of your estate plan but you will need the guidance of a skilled estate attorney. Contact the Nici Law Firm in Naples Florida to learn more. Contact us today.