The Irrevocable Trust comes in many “flavors”, and is usually created during one’s lifetime (thus it is an inter-vivos trust.) It is used extensively in long term care planning since it has multiple benefits that the Revocable Living Trust does not. Even though it is termed as “Irrevocable” that should not be viewed as not allowing flexibility in its management and control. For the relatively small percentage of persons or couples who are concerned about Federal Estate taxes (i.e. an individual with more than $5.34 million net worth or a couple with more than $10.68 million net worth) the Trust would have to adhere to IRS rules that do make it difficult or impossible to change its terms but for the vast majority of persons or couples these rules would not apply.
The benefits, which a properly drafted Irrevocable Trust may afford its creator, include:
- Protecting your assets from Medicaid claims and other governmental benefits spend down(as long as the assets are transferred into the Trust prior to the current 5 year look back period for these benefits), while retaining the income from and access to the assets;
- Qualifying for Veterans Administration benefits such as an Aid and Attendance pension of up to $25,020; and
- Protecting assets from divorce, lawsuits, and other creditors.
These Irrevocable Trusts and the rules for Medicaid and VA Benefits are very complex, and implementing a planning strategy using trusts should only be done with a qualified elder law attorney.
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