A testamentary irrevocable trust is a trust that a representative creates after the grantor's death based on the terms of the grantor's will. Because the only person who can change the terms upon which the trust is created is the creator him or herself, the trust becomes irrevocable. However, it is important to note that, contrary to popular belief, a grantor can change the terms of the trust during his or her lifetime. If you are beginning to plan your estate in Massachusetts, there are a few reasons you should consider using an irrevocable trust.
According to The Motley Fool, an irrevocable trust has more than just a few distinct advantages. For one, this type of trust does not normally count toward the overall value of your estate. If you have a large estate with a value of more than $5.49 million, which is when the top estate tax rate of 40 percent kicks in, you may want to place certain assets into the trust. Doing so can "freeze" the value of those assets before they begin to rise and therefore reduce the tax burden on your heirs.
Another benefit of an irrevocable trust is that it offers greater protection against creditors and anyone else who wishes to obtain a judgment against you. Because an irrevocable trust is its own entity, any assets you place within it become property of the trust. If you use a revocable trust, however, the law still considers the property within the trust as yours, which means it is not protected in the event of bankruptcy or insolvency.
Because the assets within an irrevocable trust are not technically yours, the state cannot force you to use them to pay for in-home care benefits, a nursing home stay or any other service for which Medicare would normally pay. This is another huge advantage of using this estate planning tool.
Finally, an irrevocable trust can prevent the misuse of your assets. If you opt to use this type of tool, you can schedule the distribution of your assets to heirs and beneficiaries on a conditional basis.
The information in this post is for purely educational purposes. It is not meant to serve as legal advice.