Irrevocable trusts are those that generally cannot be modified once they’ve been formed and funded. This means that even the grantor, or the person who sets it up, generally can’t ask to have the property that they’ve placed into the trust back. That individual can’t manage the assets contained in the trust either. Irrevocable trusts continue to be popular among individuals who are looking to protect their assets as part of their estate plan.
There are many benefits associated with an individual placing their assets in an irrevocable trust. While some grantors may see it as a negative that they cannot access nor manage any of the assets placed in it, one positive is that the property is completely protected from being assessed an estate tax when that individual dies.
It’s also important to point out that even though a grantor essentially gives up ownership of any property that they place into an irrevocable trust, those assets aren’t taken into account when an individual applies for Medicaid or other social program benefits. This may allow the grantor to qualify to receive certain compensation that they otherwise wouldn’t have been eligible for had the trust not been set up.
Setting an irrevocable trust is an ideal method of asset protection because it allows the grantor to provide for their loved ones. It removes the burden of having to pay certain taxes. It also keeps creditors at bay and from being able to lay claim to certain property if the grantor dies and still has some outstanding debts.
There are many different types of irrevocable trusts including life insurance, AB, ABC, asset protection and charitable lead or remainder ones. Each carries with them their pros and cons in terms of protecting different parties’ interests. An attorney here in Burlington can advise you of the benefits of setting up one trust versus another when you sit down to plan your New Jersey estate.