Florence & Myrtle Beach Irrevocable Trust Lawyers
Trusts have become a commonly used tool in the estate planning process. Using a trust was associated with large estates in the past, but now attorneys use trusts to help a wide range of clients to help protect and manage estates of all sizes. Irrevocable trusts provide tax benefits and can protect your assets from creditors.
The Willcox, Buyck & Williams, PA estate planning attorneys have been helping South Carolina families for over 125 years. If you’re interested in creating a special needs, dynasty, charity, asset protection, or irrevocable trust, we can help you meet your goals. Willcox, Buyck & Williams, PA provides comprehensive estate planning services, and our attorneys have extensive experience creating revocable and irrevocable trusts.
What Is an Irrevocable Trust?
As the name suggests, an irrevocable trust requires the settlor to give up all ownership of the assets in the trust. Generally, trust creators, also called settlors, name a third-party trustee to manage the entire trust. The settlor cannot change or revoke the transfer after the assets have been transferred into the trust. Estate planners can use the following types of irrevocable trusts to meet their specific long-term goals:
- Asset protection trust
- Charitable trust
- Dynasty trust
- Special needs trust
- Irrevocable life insurance trust
- Irrevocable income only trust
- Qualified personal resident trust (QPRT)
The Differences Between Revocable and Irrevocable Trusts
There are two main types of trusts: revocable and irrevocable. A revocable trust is commonly called a living trust. When creating a living trust, a separate legal entity allows the trust’s creator to retitle any assets he or she owns into the trust’s ownership. Settlors manage the assets the trust owns to benefit the beneficiaries listed in the trust agreement.
Many estate planners prefer a revocable trust because the settlor can change the terms of the trust agreement or revoke the trust entirely. The assets owned by a revocable trust can be removed from the trust at any time by the trust’s settlor. As a result, revocable trusts do not provide as many tax benefits as revocable trusts. Similarly, creditors can file claims against the assets in a revocable trust but not the assets of an irrevocable trust.
The Pros and Cons of Irrevocable Trust
An irrevocable trust is a powerful estate planning tool. As with revocable trusts, irrevocable trusts can be used to avoid the probate process entirely. When you create a trust, your beneficiaries won’t need to wait for the probate court to process your will before they can assets the funds in your estate. The probate process can be expensive and time-consuming. When you create a trust, you can let your beneficiaries access funds quickly to pay for funeral and burial expenses and any other urgent expenses.
Irrevocable Trust Tax Benefits
One of the most notable benefits of an irrevocable trust includes the tax benefits. In an irrevocable trust, the settlor relinquishes ownership interest over assets in the trust. Consequently, the assets owned by the trust are protected from excessive taxation from South Carolina and the federal government.
When the settlor transfers assets into an irrevocable trust, the trust owns the assets. As a result, the assets are protected from being seized during bankruptcy or insolvency. Assets in an irrevocable trust are protected from creditors and any party seeking a judgment against you. Suppose you have a potentially irresponsible heir or one of your heirs gets divorced. In that case, an irrevocable trust can ensure your assets will be protected from misuse and distributed to your beneficiaries according to your specifications.
Irrevocable Life Insurance Trust
When an irrevocable trust holds a life insurance policy, usually on the settlor’s life, it’s called an irrevocable life insurance trust. When this type of trust has been properly drafted and implemented, the trust can help minimize estate taxes. A trust can also provide a source of liquid assets to your estate, allowing your beneficiaries to quickly access funds to pay taxes, expenses, and debts. Although life insurance proceeds generally pass to the beneficiary tax-free, they don’t escape estate tax if the decedent has a taxable estate.
Irrevocable Income-Only Trust
An irrevocable income-only trust pays trust income to the settlor or settlor’s spouse. The principal is held in the trust estate. These trusts can be used to allow the settlor to be eligible for Medicaid benefits, an essential aspect of long-term care planning. Many estate planners will need care in a long-term care facility in their later years. Paying for these facilities, even for a few months, may drain a person’s estate quickly.
Qualifying for Medicaid provides insurance coverage for long-term care stays. However, becoming eligible can be challenging, and an individual cannot have more than $2,000 in assets. Transferring your assets into an irrevocable trust can make your assets non-countable for Medicaid eligibility. Working with an attorney is essential because the trust must be established at least five years before you apply for Medicaid coverage and must meet strict requirements. For example, the trust agreement must meet the following restrictions:
- A five-year look-back period is the same for trusts and outright gifts
- The transfer of property into the trust isn’t considered a taxable gift if limited power of appointment is retained
An irrevocable income-only trust must have a disinterested trustee, mandatory distributions of income, and no trustee discretion to distribute principal.
Qualified Personal Resident Trusts (QPRT) and Grantor Retained Annuity Trusts (GRAT)
A qualified personal resident trust (QPRT) can hold the settlor’s primary or secondary residence. Using this type of trust can reduce the taxable value of your primary and secondary home for estate planning purposes. A Grantor Retained Annuity Trust (GRAT) allows the settlor to transfer money to heirs without any estate tax liability.
Discuss Your Estate Plan with an Irrevocable Trust Lawyer
An irrevocable trust can be an important part of the estate planning process. If you would like to learn more about how to incorporate an irrevocable trust into your estate plan and whether a trust is right for you, don’t hesitate to contact Willcox, Buyck & Williams, PA. Our attorneys can also work with you to ensure your estate plan is comprehensive and includes proper titling of deeding property, health directives, insurance, and other essential tools.
Since 1895, Willcox, Buyck & Williams, P.A., has provided top-quality service to the people and businesses of South Carolina. The irrevocable trust lawyers of our firm have brought about hundreds of startup businesses and have earned the knowledge and experience to assist anyone in or near our Florence and Grand Strand, South Carolina, law offices.
From law offices in Florence and Myrtle Beach, South Carolina, Willcox, Buyck & Williams, P.A. serves Myrtle Beach, Surfside Beach, Garden City, the Grand Strand, and other communities throughout Florence County, Marion County, Horry County, Darlington County, and Georgetown County.