Estate planning often includes the establishment of a trust, which outlines how available assets will be distributed, based on the wishes of the trustor. A trust also provides legal protection for the trustor’s assets.
Solid as a Rock
An irrevocable trust is especially effective when it comes to providing a legal safeguard for assets. Unlike a revocable trust, once signed, an irrevocable trust cannot be changed, even if the trustor changes his or her mind. It is set in stone and can only be modified by the beneficiary or beneficiaries of the trust.
Additionally, once any assets – bank accounts, property, cars, etc. – are put into an irrevocable trust, ownership of those assets is transferred to the trust, and even if they decide they want to disperse of assets differently, trustors no longer have ownership over those assets.
A revocable trust is written to allow a trustor to alter or revoke the trust – he or she retains complete control – but that relaxed approach also leaves assets vulnerable. For example, if the trustor of an irrevocable trust should ever encounter problems financially – medical bills can quickly erode financial security – funds in an irrevocable trust are protected. That means even in the event of a judgement from a creditor, the assets in that trust cannot be accessed to satisfy the judgement. Because assets can be moved in or out of a revocable trust, it provides less protection, and creditors will likely be able to use available assets to satisfy a judgement.
Legal Protection from Taxation
Currently, a married couple are exempt from federal estate tax up to $22 million. Anything over $22 million, however, will require paying federal estate tax. This money move showcases an important difference between a revocable and irrevocable trust.
If you have more than $22 million ($11 million for a single person), anything in excess can be placed in an irrevocable trust. Because the trustor now longer has ownership of those assets, federal estate taxes would not come into play. A revocable trust still considers the trustor to be the owner of assets in the trust, so it would not protect assets in excess of $22 million from being taxed.
If you are looking for an experienced attorney in irrevocable trusts, call the law offices of Steven W. Tarta, Esquire at (201) 444-8448 or send an email to info@tartalaw.com. The Tarta Law office has more than 45 years of experience and specializes in all forms of estate planning, including irrevocable and revocable trusts. Tarta Law serves clients in Midland Park, Ridgewood, Glen Rock, Wycoff and Franklin Lakes.
Steven W. Tarta, Esq. brings more than 45 years of professional experience to his practice, with a sophisticated focus on Estate Tax Planning, Living Trusts and Elder Law.