Wiener and Wiener LLP
With Offices In Allentown And West Palm Beach, We Serve Throughout Eastern Pennsylvania And Florida

Why are irrevocable trusts used by many families?

On Behalf of | Aug 3, 2020 | Estate Planning |

Estate planning utilizes a number of different tools and techniques to achieve a result that best meets your desired result. There is no one “best” design or plan. Each depends on personal situations and the goals to be achieved. Setting up an irrevocable trust is one option, but there are certain things to consider before doing so.

A trust allows a trustee to hold the rights to assets and property (legal title) for the “benefit of a third-party beneficiary.” With an irrevocable trust, the terms of the trust cannot be changed (therefore the “irrevocable”) The confusing similar sounding “revocable trust” is a trust that allows you to make changes during your lifetime.

So under what circumstances should someone set up an irrevocable trust? No specific, concrete answer exists to such a question. Different people approach estate planning in different ways, and relationships with the beneficiaries vary. Some people may even have questions about the beneficiary’s competence to make decisions.

Fewer estate taxes is one possible benefit

Cutting down on estate taxes may be one benefit to an irrevocable trust. These trusts may provide for beneficiaries to have immediate rights in the trusts or the person setting them up may retain some rights and use a variety of techniques to minimize and gift tax that may result in setting up the trust.  Life insurance trusts to own (and possible to hold funds to pay premiums) life insurance policies without them being included for Federal Estate tax is a common use of irrevocable trusts. Ultimately the goal of these trusts are to minimize estate taxes while allowing you to achieve your desired goals in transferring wealth to the beneficiaries.

Medicaid eligibility is another potential benefit

Maintaining eligibility for programs like SSI and Medicaid comes with limitations on income and assets. An irrevocable trust might address such a complicated situation. Also, an irrevocable trust could come with protections against creditors.

During an estate planning meeting, an attorney can detail the laws regarding irrevocable trusts in Pennsylvania. Your attorney can also provide additional insights into an irrevocable trust’s benefits and drawbacks and help you understand which of these trusts or other estate planning  techniques might best benefit you.