An irrevocable living trust is a type of trust that cannot usually be changed or revoked after it is created. This means the person creating the trust gives up control of the assets placed inside it. While it is less flexible than a revocable living trust, an irrevocable trust offers benefits like protecting assets, reducing estate taxes, and planning for long-term care.
Irrevocable Living Trusts
Once property is transferred into an irrevocable living trust, the assets are no longer owned by the person who created the trust, known as the grantor. A trustee manages the trust according to its terms, and beneficiaries may receive benefits from the trust. This setup can be used for a variety of goals, including minimizing estate taxes, protecting assets from creditors, and providing for family members.
Because control over the assets is given up, it is important to fully understand the terms before creating an irrevocable living trust in North Carolina. The trust must comply with federal and state rules, such as IRS regulations for tax purposes and Social Security or Medicaid rules for special needs beneficiaries. Using an attorney to create the trust ensures it is legally binding and meets the intended goals.
Benefits for Families and Estate Planning
Irrevocable trusts can help married couples manage how assets are passed to a surviving spouse and beyond. They can also be named as beneficiaries of life insurance policies or other financial accounts. For Medicaid or long-term care planning, placing assets into an irrevocable trust can help a person qualify for coverage by limiting their countable assets.
Because the grantor no longer owns the assets, the trustee is responsible for managing the property, paying taxes, and distributing funds according to the trust terms. Beneficiaries receive the benefits set forth in the trust, but they cannot freely access or control the property.
Limited Changes Are Possible
Although irrevocable living trusts are mostly permanent, North Carolina law allows some changes in limited situations. For example, the trustee can use a process called decanting to transfer assets to a new trust with updated terms. Even then, the changes cannot alter the core purpose of the trust. Understanding these rules before creating the trust is important to prevent unintended consequences.
Working With a Probate and Trust Lawyer
Creating an irrevocable living trust in North Carolina is a major decision. Working with a probate and trust lawyer can help make sure the trust is structured correctly, complies with all applicable rules, and meets your estate planning goals. A lawyer can guide you through preparing the trust documents, funding the trust with assets, and managing compliance for taxes or benefits programs.
Get Legal Help
An irrevocable living trust provides long-term protection for your assets and helps secure your family’s financial future. Because the trust is permanent and assets are removed from your control, legal guidance is recommended to ensure it meets your goals. If you are considering creating an irrevocable living trust in North Carolina, contact a probate and trust lawyer at Salines-Mondello to discuss your options and get started.