Besides the Revocable Living Trust, other trusts may be a part of your overall estate plan. Some of these may be separate from your Revocable Trust, but many can be incorporated into your Revocable Trust.
An irrevocable trust is not revocable. Once put it in place, it can’t be changed or revoked in most instances. Most irrevocable trusts require you to select someone other than yourself to be the trustee. What does that mean? It means you don’t have the same control over your assets that you have with a revocable trust.
Since most of us like to be in control of our own assets, you may be asking yourself: Why would anyone decide to put their assets in an irrevocable trust and let go of control over their assets?
The primary reason is estate tax avoidance. Estate taxes, or inheritance or death taxes as they are sometimes called, are calculated based on what you own – what is in your estate – at your death. Right now estate taxes are not assessed until a person has over $5.43 Million in assets. This is called the estate tax exemption amount.
For those over the exemption amount (doubled for a couple, as each has the full $5.43 Million exemption), establishing an irrevocable trust can take the assets over the exemption out of their estate. Most intend for their children to inherit the assets anyway, so often the irrevocable trust is created to benefit their children.
ASSET PROTECTION TRUSTS
Because we still have control of the assets in our revocable living trust, it does not provide any protection for the assets in the trust. There are trusts available to protect your assets, however. The type of trust you select for this will depend on a number of factors, including types of assets, your goals for those assets, the degree of control you are willing to relinquish, and the location of the assets.
A plan to protect your assets should be put in place well in advance of the threat of a lawsuit or claim. If trouble is already on the horizon, or someone already has a claim, it is too late to start asset protection planning.
If you are an author with copyrights and publications, you may wish to include provisions in your trust to address your literary assets. If your family wouldn’t have a clue about how to continue to market and receive income from your literary works, you can put a plan in place appointing the right people to manage those assets if you are incapacitated or when you are gone.
As Americans, we love our pets, don’t we? Sometimes our clients come in to the first meeting with plans already in place for who would care of their pets – even if they haven’t yet figured out who will be successor trustee to take care of them!
A pet trust might not be what you think. We don’t actually leave money to a pet – it’s not legal. We can, however, leave money with specific instructions for their care. A pet trust assures that the pets are taken care of the way we instruct with the money we leave. It is legally binding on the people we appoint to manage the money and care for the pets.
The pet trust is especially useful if you own an animal or pet that will live a long, long time, or one that is especially expensive. Tortoises and certain exotic birds could well outlive you. A horse can outlive you, and their care, including boarding, can be quite expensive.