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When does an irrevocable trust make sense?

A trust is a legal instrument that involves three parties. The grantor is the person who deposits assets into the trust. Next, the beneficiary is the person or group of people who will ultimately benefit from the assets in the trust. Finally, the trustee is the person or other party that is responsible for overseeing the trust and its assets.

Some people in the Winter Haven and Lakeland area likely understand these basic principles of a trust. But, trusts can take on various forms, depending upon the purpose for which the grantor is creating the trust. For example, unlike a revocable trust, an irrevocable trust is one that the grantor cannot modify during his or her lifetime. Given this less flexible nature of the irrevocable trust, when can this kind of trust be useful?

Although there are various kinds of irrevocable trusts, they all generally share some of the same attributes that can make them beneficial under the right circumstances. One advantage is that irrevocable trusts offer protection against creditors who may try to get a judgment against the trust assets. By contrast, the assets in a revocable trust are still considered to belong to the grantor, and thus creditors may be able to get the assets through legal action.

Another advantage of an irrevocable trust is that the assets in the trust do not count against the grantor when it comes to qualifying for certain government benefits, like Medicare. Thus, the person could still get help paying for medical service without having to use assets from the trust.

Irrevocable trusts can also be used to make conditional distributions of the assets to beneficiaries. Thus, the assets are protected from misuse by the beneficiaries.

While irrevocable trusts are not appropriate for all people, they can be useful in certain situations. A trust administration attorney can help people in Florida determine what kinds of trusts are sensible for their particular circumstances.

Source: The Motley Fool, "Is an Irrevocable Trust the Right Move for You?," Matthew Frankel, Accessed on Dec. 6, 2016

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