The terminology itself is useful for understanding irrevocable trusts, but it is also helpful to appreciate a few details. These structures still involve the same parties under Florida laws governing trusts, including the grantor who creates it, the trustee who handles management, and beneficiaries who receive distributions. However, the definition of an irrevocable trust means that it cannot be modified, revoked, or amended. From the grantor’s perspective, you might wonder why anyone would give up control over assets placed in the trust.
In short, there are generally three reasons someone would consider creating an irrevocable trust. By removing assets from ownership as an individual, you may be able to take advantage of certain benefits. A Fort Lauderdale estate planning lawyer can provide details and advise you on the right fit, but you might consider an irrevocable trust if:
1. You want to avoid or minimize federal estate taxes. Florida does not have an estate or inheritance tax, but high net worth individuals may have concerns about the federal estate tax. The laws apply to the fair market value of the decedent’s assets at death, as opposed to when he or he acquired them. For 2022, the tax applies to all assets in excess of $12.06 million. Note that there is an unlimited marital deduction for assets transferred to a surviving spouse at the death of the first.
If your estate value is around the threshold amount, an irrevocable trust may be an option to take ownership of assets out of your hands.
2. You anticipate the need for Medicaid benefits to pay for long-term care. It may come as a shock to learn that the average cost for an assisted living facility is $4,000 per month, ranging up to $9,700 monthly for a private room in a nursing home. Medicare does not pay for long-term care, but some individuals might qualify for Medicaid to help defray the expenses.
However, as a needs-based public health program, your assets and income must be under a certain level to be eligible for Medicaid. With a properly crafted irrevocable trust in which you completely divest control, you may qualify.
3. You seek to protect assets from creditors via legal means. Some individuals may seek protection from legal liability, especially in professions that are often the subject of lawsuits. Examples include health care providers, real estate developers, and architects. You can create an irrevocable asset protection trust to shelter real estate and personal property, but there are strict rules regarding who can act as trustee.
Speak to a Broward County Estate Planning Attorney About Trust Options
Divesting yourself of assets via an irrevocable trust is a risky move, so it is important to discuss options with a knowledgeable lawyer. Plus, legal representation is critical when creating an irrevocable trust, since errors and omissions could thwart your intent. For more information, please contact Francois Williams Legal LLC to schedule a consultation. You can contact our offices in Fort Lauderdale, FL by calling (954) 372-2021 or filling out our online form.