If you want to protect your assets, then you should contact an Irrevocable Trust attorney. Doing so will allow you to set up one of Florida’s most powerful tools for asset protection, probate avoidance, tax sheltering and long-term planning for your family.
What is an Irrevocable Trust?
An Irrevocable Trust is an agreement between a settlor, trustee and designated beneficiaries that cannot be changed or revoked unless there is a mutual agreement between all affected parties.
The Trust creator (also referred to as the ‘settlor’) effectively transfers assets out of their name to the Trust and cannot take them back. They cannot change the selected beneficiaries and cannot amend the terms, instructions and provisions listed in the Irrevocable Trust agreement.
Any transfers of assets to an Irrevocable Trust are permanent and assigned to benefit the trust beneficiaries.
What is a Trust?
A trust is a separate legal entity that can be set up to manage an individual’s assets. They can be created to remove liability from the creator and assure that their assets are used as appropriate.
Once assets are assigned to a Trust, a trustee will manage them. The Trustee is responsible for acting in the best interest of the beneficiaries, from notices and distribution to investments and accounting.
Difference Between a Revocable and Irrevocable Trust?
The main difference between an Irrevocable Trust and a Revocable Trust is how each is modified or revoked.
A Revocable Trust can be amended or revoked at any time before the settlor dies. Irrevocable Trusts are generally unchangeable, except under certain circumstances and when written correctly.
Irrevocable trusts also provide tax-shelter benefits, while Revocable trusts do not.
The Benefits of an Irrevocable Trust
An Irrevocable Trust in Florida offers many benefits for families and individuals, from estate planning to Elder Law.
An Irrevocable Trust can be used to avoid probate. In Florida, a court starts the probate process upon the death of a person with a Will.
The court will appoint a personal representative to administer the decedent’s estate. This process is usually long, formal and very testing for families looking to receive their inheritance.
Using a Trust that an Irrevocable Trust attorney has well designed, you can avoid the probate process by assigning a Trustee to manage and administer the Trust’s assets efficiently and fast.
Protection from Creditors
One of the main benefits we see as Irrevocable Trust attorneys in Florida is the asset protection from creditors.
Once an asset is transferred to a Trust, it is owned by the Trust. So it’s safe from legal judgments and creditors that may put the ownership of assets at risk if an individual owned them.
An Irrevocable Trust can be designed to reduce estate tax. With the help of an Irrevocable Trust attorney, a grant or settler can be relieved of income tax liability for income generated through assets and potentially avoid estate taxes.
An irrevocable trust can be designed to provide asset protection in various ways.
For example, if designed as a ‘discretionary trust,’ a Trustee can distribute trust assets at their discretion and in the best interest of the beneficiaries. This can allow an individual to be in control of the Trust and gain asset protection from creditors.
Some Irrevocable Trusts can also contain highly effective spendthrift clauses.
Spendthrift clauses state that creditors cannot force beneficiaries into assigning their beneficiary interest in the Trust – adding an extra layer of protection.
However, Spendthrifts don’t allow a recipient to transfer their interest in the Trust. This means it is not suitable for everyone, such as a beneficiary who would be blocked from selling their rights in a trust to a third party.
Medicaid Spend Down
If written well by an Irrevocable Trust attorney, you have a way to preserve your assets and money from ‘Medicaid spend down.’
Five years after assets have been put into a trust, they can no longer be used for nursing homes and assisted living expenses. As Irrevocable trusts comply with Federal and State Medicaid requirements, it is a reliable legal strategy that can protect your assets from being depleted by medical costs – while ensuring you can still get the Medicaid financing help you need.
Why an Irrevocable Trust Attorney?
Setting up an Irrevocable Trust alone is highly discouraged. The language of the agreement must be exact. Irrevocable Trust can’t be edited in most cases, so mistakes at this point could be extremely damaging.
Instead, you should contact an Irrevocable Trust attorney. Their thoughtful planning and careful attention to detail will ensure all your goals are met and that your family’s financial future is safeguarded.
An Irrevocable Trust attorney has the expertise to help you build an agreement that protects your family, assets and future.
They’ll also help choose a Trustee, transfer assets into a Trust and, if needed, handle any court proceedings.
When an Irrevocable Trust Might Not Be Suitable:
There are circumstances when an Irrevocable Trust might not be suitable for you and your family.
Firstly, these types of Trust are not easy to revoke or modify. So you need clear goals in place that allow for it. Secondly, these types of Trusts can incur a higher tax rate on income.
Modifying an Irrevocable Trust
Although the terms of an Irrevocable Trust agreement don’t allow for amendments, there are still situations where beneficiaries may want to make changes.
There are scenarios where this may be warranted, such as changes in family finances, tax law changes, new Trustmaker goals or other specific circumstances.
Under Florida law, families can alter an irrevocable trust if all the affected parties agree it is appropriate and in their best interests.
To do so, an interested person must ask the court to ‘reform’ the agreement and provide convincing evidence that shows the current terms are not accomplishing the intent. A typical example of this is when a change in tax laws causes the current agreement to no longer gives the intended tax benefit.
Decanting is a method used to change an Irrevocable Trust indirectly. This process allows a Trustee to transfer the trust principal to the Trustee of a second trust to benefit a beneficiary included in both trusts. This process effectively replaces the existing Trust terms with a new agreement.
Irrevocable Trusts can terminate if there is a date or condition stated in the agreement. There may also be circumstances where a Trustee can terminate a trust with less than $50,000 of assets if there is no justification for the continued trust administration costs.
Finally, there are other routes to modifying Irrevocable Trusts through judicial proceedings or carefully designed Trust agreements. If you wish to amend or revoke an Irrevocable Trust, you should contact an Irrevocable Trust attorney to navigate this complicated process.
Contact a Florida Irrevocable Trust Attorney
If you want to protect your assets and your children’s inheritance, then you should contact an Irrevocable Trust attorney to help you set up one of Florida’s most powerful Trust planning tools.
Battaglia, Ross, Dicus & McQuaid, P.A. is a U.S. News and World Reports Tier 1 law firm in Florida, specializing in Estate Planning & Probate since 1958. With award-winning experienced attorneys, they give you the best chance of getting the resolution you hope for.
Schedule a free consultation today to get started.