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Articles of Interest | Shell Fleming Davis & Menge | Pensacola, FL Attorneys

Shell, Fleming, Davis and Menge, Pensacola Attorneys Since 1956.

Articles of Interest

Irrevocable Trusts

While a Revocable Trust permits you to maintain full control (as Trustee) and have access to all your assets (as beneficiary), an Irrevocable Trust, once created, may prohibit your right to control the trust (as Trustee) or have access to your assets (as beneficiary), but you get to decide to what extent.

It is a common misconception that irrevocable trusts, once created, cannot be changed. While that is true of many irrevocable trusts created to avoid taxes (tax reduction or avoidance trusts), it is not true of all irrevocable trusts. An irrevocable trust is a trust you create for the benefit of yourself or others and once created, you (the Grantor) must give up your right to something.

Debtor/Creditor law provides that whatever you can get, your creditors can get. There are two kinds of creditors: known (i.e. credit card debt) and unknown potential (unforeseen lawsuits, nursing home, divorce, etc.). A typical income-only irrevocable trust permits you to receive the income on your assets, but you must give up your right to your principal. In some irrevocable trusts, you can retain the right to change who gets your assets during your life and after your death, and maintain 100% control of your assets until your mental disability or death. Again, it’s up to you what you do with your stuff. A qualified estate planning attorney can help you.

Tax reduction/avoidance trusts are much more restrictive than asset protection trusts. Typically, you cannot retain any right to control or access any of the assets in an irrevocable tax reduction/avoidance trust. There are many irrevocable trusts available that are quite flexible and grantor-friendly. You should consult a qualified estate planning attorney to get counseled on all your options before creating an irrevocable trust.

Steven Gray