When To Consider It As Your Estate Option

By Dave Ison

In this article, I provide an overview about the irrevocable trust and it’s benefits. Keep in mind that your current estate plan could be significantly impacted by the Tax Cuts and Jobs Act (TCJA) of 2017. It’s significance is not to be ignored. Please contact me about TCJA.

Irrevocable Trusts Benefits

The strength of the irrevocable trust is that it cannot be modified, amended, or revoked. There are rare circumstances when it can be modified, but it’s designed to be unchangeable – hence the name “irrevocable.”

It’s Private – No Probate. No Public Record

Trusts share that overarching benefit of never going to probate. It provides a clear structure of who gets the assets – and when. You decide who inherits, not the court. By comparison, a will would open up your life to public scrutiny. Anyone can look up a probate court proceeding. A will is a window into what you owned and who received it.

Irrevocable Trusts & Debts & Creditors

If you work in an industry that puts you at risk for lawsuits, consider a particular kind of irrevocable trust designed for asset protection. It can shield your assets from creditors and other legal judgements if you create the protection structure carefully, following all legal strictures, and before the debt is incurred. Strictly speaking, an irrevocable trust takes your assets away from your personal ownership and puts them in the trust itself. Since the property isn’t yours, creditors and judgement holders can’t get at it either. If created, structured, funded, implemented, and managed properly, the trust owns the assets. Creditors are shut out.

What About Taxes?

Keep in mind that the TCJA changed the gift and estate tax threshold from $5.5 million to $11.4 million in 2019. Only lifetime gifts or transfers at death in excess of the tax threshold are subject to gift and estate federal tax. That’s a significant increased in exemption. It’s scheduled to expire in 2025, unless there’s a new round of tax legislation by then. If you have an estate that is taxable, that is, an estate that exceeds the threshold amount, it is advisable to transfer assets while the limit remains high. Often an irrevocable trust is an essential part of this type of planning.

Irrevocable trusts may be established as charitable trusts. Charitable lead trusts and charitable remainder trusts are two such structures. Depending on how they are setup, these trusts can pay your beneficiaries first, and then distribute the balance of assets to a charity. Or it can be set up to work the other way around.

Can It Be Undone?

Life means change. Our personal circumstances change. Setting up an irrevocable trust 25 years ago might have been an excellent idea. But, do those reasons still hold today? Is your irrevocable trust your best option now?

Many states have common law or statutory laws that allow modification of an irrevocable trust. But, it it’s not easy and the rules established by common law and statute must be strictly followed. Even when it is legally possible, modifications may present potential liabilities for the fiduciaries or beneficiaries, especially when minors are involved. Legal guidance by an attorney with experience in trusts and estate is a prerequisite to modification of an irrevocable trust.

Modern documents often address these issues by creating flexibility within the provisions of the trust. These documents often incorporate provisions for special co-trustees, trust advisors, trust protectors, decanting, and other provisions to allow the trust, though irrevocable, to be modified to keep the grantor’s intent as the guiding principles for managing the trust assets, especially when unforeseen events arise.

Call To Action

Estate planning can be filled with questions and concerns. My goal is to help you with your estate planning questions and provide highest quality legal advice that I can. I believe that all my clients deserve the peace of mind that comes with knowing that their estate planning is up-to-date and meets the needs of today – and tomorrow.

Feel free to reach out to me. I look forward to serving you.

Ison Law
10348 Sawmill Road
Powell, OH 43065-1108

Phone: (614) 336-3083
dave@ison.law