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Irrevocable Trust

What is an Irrevocable Trust? Irrevocable Trust Lawyers

An Irrevocable Trust Can Be Useful for Asset Protection in the event of a Long-Term Illness

The main reason for setting up an Irrevocable Trust is for Medicaid planningUnlike its close cousin (the Revocable Trust), an Irrevocable Trust is a trust that cannot be modified or terminated without the permission of the named Beneficiary. The Grantor (creator of the trust), having transferred assets into the Irrevocable Trust, effectively removes all of his or her rights of ownership to the assets and the trust. One primary reasons people need an desire an Irrevocable Trust estate planning instrument, is that an irrevocable trust can be useful for asset protection in the event of a long-term care illness, such as dementia, Alzheimer’s, Parkinson’s, etc.

What is the Primary Purpose of an Irrevocable Trust?

The main reason for setting up an Irrevocable Trust is for estate and tax considerations, and for Medicaid planning and, here in California, Medi-Cal planning – typically for a senior citizen. The benefit of such a Trust for estate assets is that it removes all ownership, from the grantor’s taxable estate by effectively removing the trust’s assets from grantor’s estate. The grantor is also relieved of the tax liability on any income or gains that might be generated by the assets.

How an Irrevocable Trust is used in Medicaid and Medi-Cal Planning

An Irrevocable Trust is a useful legal instrument for people who are in their twilight years but want to preserve their home and assets for their surviving spouse and/or children. An Irrevocable Trust is a useful for individuals who:

  • Expect that they may desire Medicaid and/or Medi-Cal benefits to pay for their long-term nursing home care in the future (even if their current health is OK).
  • Have not yet obtained long-term nursing care coverage.
  • Are concerned about preserving assets for their spouse,children, or desire to leave an Inheritance.

An Irrevocable Trust —is a highly complex legal instrument and should only be engineered and drafted by an experienced and skilled estate-planning lawyer. An Irrevocable Trust is a Medicaid and Medi-Cal Planning estate-planning tool that will enable you to divest yourself of assets so you will be able to take advantage of Medicaid and Medi-Cal programs that provide long-term nursing home care by gifting or transferring assets to an Irrevocable Medicaid Trust. The Medicaid 5-year penalty period will apply to any gifts or transfers, therefore, the sooner you get started, often the better if you are approaching the age where your peers are needing such services and care. Here are some benefits of Irrevocable Medicaid/Medi-Cal Trust:

  1. An Irrevocable Trust helps avoid probate because the trust, instead of a Will directs where and how the “Grantor’s” assets are to be distributed. The Trustee of the Irrevocable Trust will manage the “Grantor’s” assets. Such a Trust may be kept in place following the death of the Grantor to help manage the assets for the surviving spouse or Grantor’s children.
  2. An Irrevocable Trust can protect nonexempt assets from depletion for payment of long-term nursing home care.
  3. An Irrevocable Trust established for Medicaid and/or Medi-Cal planning purposes can hold any type of asset or property. Interest Income can be distributed to the Medicaid / Medi-Cal applicant or spouse, or the children. The principal of the trust assets cannot, however, be distributed to the applicant or spouse. Principal distributions, when allowable, can only benefit the Grantor’s children.

Drawbacks to Irrevocable Medicaid/Medi-Cal Trust:

  1. The main drawback is that, in order to be a Medicaid/Medi-Cal estate-planning Trust, the Trust must be Irrevocable. Once implemented, the Grantor loses control and access to the principal assets transferred to the trust.
  2. If the applicant is currently deemed “incompetent,” an Irrevocable Trust cannot be established. In such instances a compromise option would be to use a Durable Power of Attorney (previously signed) to transfer assets out of the applicant’s name.
  3. The use of a Irrevocable Trust may cause Medicaid and/or Medi-Cal to more thoroughly scrutinize all asset transfers more closely.

Tax Benefits of an Irrevocable Trust

There are significant potential tax benefits in establishing an Irrevocable Trust when compared to a Revocable Trust.  Since this specialized Trust would holds your assets, those assets will not be subjected to estate tax which will preserve your assets for your spouse, children or other beneficiaries.  A Irrevocable Trust is private and keeps your family finances out of the public record; upon your death Probate will be avoided and that, in itself, will save one to two years of time. frustration, and significant money destined for your beneficiaries.

Vincent W. Davis & Associates are experienced Irrevocable Trust attorneys who understand that you may have many questions concerning Trusts and other estate-planning tools, and that making the right choice is very important for you and your family.  It is sometimes difficult to explore such options but you do not have to face them alone.  With our experience in the field of trusts and estate planning we can advise you and help you make a decision that works for you.

Contact an experienced Trust and estate-planning Lawyer in Southern California for guidance as to what estate-planning strategy is the right choice for you and your unique circumstances.

Set Up a Day, Evening or Weekend Appointment Now

For assistance in considering a possible Living Trust, please contact The Law Offices of Vincent W. Davis & Associates in Southern California for a complimentary consultation. Consultations are available in Los Angeles, Orange County, Inland Empire including Riverside or San Bernardino Counties. We also handle California Probate and Estate matters for out of state individuals. Mr. Davis will personally make time to share his legal advice with you and your loved ones.

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