Q: Why would anyone use an irrevocable trust as part of their estate plan?
A: There are many reasons to use an irrevocable trust, but here are two quick ones. One, an irrevocable trust can be used to remove assets from your taxable estate, so if you have an estate that exceeds the current estate tax exemption levels ($11.18 million per person) you may want to use an irrevocable trust to transfer wealth to future generations. Second, irrevocable trusts are also used for asset protection purposes, such as when you want to engage in Medicaid Planning or other forms of asset protection planning. If you transfer an asset to an irrevocable trust, you no longer own the asset personally. Instead the Trustee of the Irrevocable Trust holds the assets for the benefit of the trust beneficiaries. The trust beneficiaries can generally be anyone you choose. Therefore, if you are considering deeding your house to your children to "protect it from the nursing home" or to accomplish some other objective, consider using an irrevocable trust instead. An irrevocable trust can often accomplish your objectives while still protecting your rights to use an asset during your life and protecting you and your beneficiaries from creditors, death, divorce, and other unforeseen circumstances. I recommend speaking with a qualified estate planning attorney before attempting to engage in any of the techniques described above.
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