What is an Irrevocable Trust
An irrevocable trust is a powerful estate planning tool that can protect your assets from creditors, reduce estate tax exposure, and help qualify for government benefit programs. NewPoint Law Group's Roseville attorneys help clients understand when an irrevocable trust is the right strategy and how to structure it properly under California law.
What Is an Irrevocable Trust? | Estate Planning Attorneys in Roseville, CA
Defining an Irrevocable Trust
An irrevocable trust is a trust that, once established and funded, generally cannot be changed, amended, or revoked by the grantor without the consent of the beneficiaries (and in some cases a court). This is the fundamental difference from a revocable living trust, which the grantor can modify or dissolve at any time.
By permanently transferring assets out of your personal ownership and into an irrevocable trust, you give up direct control but in doing so, you can achieve legal and financial protections that a revocable trust cannot provide.
Purposes of an Irrevocable Trust
Estate Tax Reduction: Because the assets are no longer part of your taxable estate, they are generally not subject to federal estate tax at your death potentially preserving more for your beneficiaries.
Asset Protection: Assets held in a properly structured irrevocable trust may be shielded from future creditors, lawsuits, and judgments an important advantage for business owners and professionals with liability exposure.
Medi-Cal Planning: Transferring assets into an irrevocable trust well in advance of needing long-term care may help protect those assets from Medi-Cal spend-down requirements, though California's look-back rules require careful timing.
Life Insurance Planning: An irrevocable life insurance trust (ILIT) can shield life insurance proceeds from estate taxes and creditor claims, preserving those funds for your heirs.
Special Needs Planning: Certain irrevocable trusts can hold assets for a beneficiary with disabilities without affecting their eligibility for need-based government programs.
Common Types of Irrevocable Trusts
Our attorneys can help you evaluate which structure fits your goals. Common options include irrevocable life insurance trusts (ILITs), Medi-Cal asset protection trusts, charitable remainder trusts, spousal lifetime access trusts (SLATs), qualified personal residence trusts (QPRTs), and grantor retained annuity trusts (GRATs).
The Trade-Off: Control vs. Protection
The primary trade-off with an irrevocable trust is the loss of direct control over the transferred assets. This is a significant step that requires a clear understanding of your financial goals and family situation. Our attorneys take time to walk through the implications with you before any trust is established.