Revocable Living Trust

Irrevocable Living Trust

Irrevocable living trust is defined as a trust which can neither be terminated nor can be modified, until and unless the beneficiary provides permission to do that. In this kind of trust, once the grantor has transferred all his assetsto the trust, the grantor do not possess any control over them.

It can be said that irrevocable living trust is the opposite of revocable living trust, where the grantor may turn up for some modifications and alterations. An irrevocable trust is mainly taken into consideration in cases like tax and estate considerations.

Irrevocable living trust compared with revocable living trust:

The terms in an irrevocable trust can only be modified by the state high court which has its jurisdiction over the trust taken into consideration. Both the trusts can be regarded as living trusts if the grantor has asked for it during his/her lifetime, rather than it taking effect at the time of the grantor’s death.

The other main difference between the two is that in revocable trusts state laws carry on considering the grantor as the owner of the properties mentioned in the trust.

Grounds where irrevocable living trusts are considered:

irrevocable living trust

  • Implications regarding estate taxes: Irrevocable living trusts are used as an important tool in, an estate planning with an objective in mind of minimizing tax liabilities of the estate itself. It helps in reducing the taxes paid in order to keep ownership of the existing assets. Revocable living trusts do not provide the above opportunity.
  • Probate avoiding: Irrevocable living trust along with all other trusts bypass probate. As the court of the probate cannot have jurisdiction on asset trusts. After creation of an irrevocable living trust, there is no essentiality of drafting a will which consist the instructions according to which the beneficiaries will be receiving the estate. Which means the family members are not provided with the opportunity of questioning the trust for whatever they get or rather don’t get? Although this can effect in delaying the distribution of the assets mentioned in the trust due to litigation.
  • Planning of Medicaid: One requirement which is of prime importance in receiving Medicaid assistance is depletion of the entire assets in order to keep the medical problems at a distance. Proper planning of the irrevocable living trust helps you in Medicaid, even without liquefying your assets. Planning of it is however one of the many issues that had to be taken care of, especially timing of the trust which should be done in accordance to the consultation of the lawyer.

The rules of taxation vary from one jurisdiction to the other, but generally, the grantor does not receive or can enjoy the benefits of the trust being the trustee of that trust.

The irrevocable living trust may include assets like life insurance policies, money, business and assets related to investments, but it never states that the assets’ list is limited to the above topics.

We can conclude by saying that, irrevocable living trust is one of the major modes of doing justice to our assets, in helping the mankind and to tackle different litigating aspects.