Irrevocable trusts can offer significant benefits including protection from certain creditor claims, eligibility planning for public benefits, opportunities for estate tax planning, and detailed control over how assets are distributed. They also often help avoid probate for trust assets, streamline administration for survivors, and create predictable outcomes for beneficiaries across generations.
When drafted and funded correctly, irrevocable trusts can shield assets from certain claims and help individuals qualify for means-tested benefits by removing countable assets from the grantor’s estate. Timing, trust terms, and compliance with lookback rules are essential to achieving these outcomes under applicable state law.
Hatcher Legal combines business and estate planning experience to address the intersection of commercial interests and family succession. We draft tailored trust documents, coordinate funding steps, and advise trustees on fiduciary duties to help ensure the document’s intent is carried out efficiently and in compliance with applicable law.
Trust administration requires careful accounting, timely distributions, tax filings, and adherence to trustee duties. Periodic review helps address changes in family circumstances, asset values, and law. Regular check-ins ensure the trust continues to meet objectives and allows updates through successor planning where permitted.
An irrevocable trust generally cannot be changed or revoked by the grantor once it is properly funded, which means the grantor gives up ownership and control of the trust assets. A revocable trust, by contrast, allows the grantor to retain control and make changes during their lifetime, providing more flexibility but fewer protections. Choosing between the two depends on goals such as creditor protection, Medicaid planning, tax considerations, and the desire for postmortem control. A planning discussion will explain trade-offs related to control, tax treatment, and the timing needed to achieve specific benefits under state rules.
Serving as trustee of your own irrevocable trust is possible in limited circumstances, but doing so may affect the trust’s legal and tax treatment depending on the powers retained. When the grantor retains too much control, courts or benefit programs may consider the assets still owned by the grantor for purposes such as Medicaid eligibility or creditor claims. Many clients choose an independent or successor trustee to avoid those issues, or they draft the trust carefully to balance involvement with the need to remove assets from the grantor’s legal estate. We review the specific powers you need to retain and their potential consequences.
Irrevocable trusts are commonly used in Medicaid planning because transferring assets into an appropriately drafted trust can remove those assets from the applicant’s countable resources, subject to state lookback periods and transfer rules. Proper timing and trust terms are essential to ensure transfers are recognized and benefits eligibility is preserved. Because Medicaid has strict timing and transfer rules, planning should occur well in advance of when benefits are needed. Early coordination with counsel helps avoid disqualifying transfers and supports a strategy that balances asset protection with eligibility requirements.
Assets properly transferred into an irrevocable trust typically avoid probate because they are owned by the trust, not the individual, at death. Avoiding probate can reduce administration time and keep estate matters private, but only assets actually titled in the trust will receive this benefit. Complementary steps such as beneficiary designations and coordinated titling are necessary to ensure all intended assets are covered. We help identify which assets should be retitled and prepare the documentation needed to ensure a smooth transition at death.
By definition, irrevocable trusts are difficult to amend or revoke. Some trusts include limited reserved powers or mechanisms for modification through court proceedings or agreements among beneficiaries, but these paths are constrained and vary by jurisdiction. Expect less flexibility than with revocable instruments. When planning, it is important to anticipate future changes by including contingency provisions for successor trustees and alternative distribution paths. We can draft provisions that provide appropriate safeguards while preserving the protective features essential to the trust’s purpose.
Tax treatment of irrevocable trusts depends on the trust type and applicable law. Some trusts are treated as separate taxable entities with their own tax identification numbers and filing obligations, while others may have tax consequences passing through to beneficiaries. Gift and estate tax implications may arise at funding or death. Coordinating trust planning with tax advisors ensures appropriate handling of gift tax returns, basis calculations, and annual trust filings. We work with accountants to structure trusts in a way that aligns tax planning with asset protection and legacy goals.
Trustees have fiduciary duties to follow the trust terms, act prudently, avoid conflicts of interest, and keep accurate records. If a trustee fails in these duties, beneficiaries may seek remedial actions including accountings, removal of the trustee, or surcharge claims in court to address damages caused by mismanagement. To reduce the risk of disputes, clear instructions, regular communications, and proper recordkeeping are recommended. We assist trustees in understanding their obligations and help beneficiaries pursue remedies when a trustee’s actions deviate from the trust terms or legal duties.
Funding an irrevocable trust after signing typically requires retitling property, transferring account ownership, executing deeds for real estate, and assigning interests in businesses or securities. Each asset type has specific steps and documentation needed to effect a valid transfer into the trust. We create a funding checklist tailored to your assets and coordinate with financial institutions, registrars, and title companies to complete transfers. Proper documentation at the time of transfer is critical to ensure the trust’s protections and objectives are realized.
Irrevocable trusts can be useful for business succession by separating ownership from personal assets, preserving business continuity, and imposing transfer restrictions to protect value. Trust provisions can coordinate with shareholder agreements and buy-sell arrangements to facilitate orderly transitions and limit forced sales under adverse circumstances. However, the suitability of a trust depends on the business structure, tax implications, and governance documents. We evaluate how a trust would operate alongside existing agreements and advise on drafting terms that meet both succession and asset protection goals.
Irrevocable trusts should be reviewed periodically to ensure they remain aligned with family circumstances, asset changes, and evolving law. Reviews every few years, or after major life events such as marriage, death, significant asset transfers, or business changes, help identify needed adjustments to ancillary planning documents and funding status. While core irrevocable terms may be hard to change, reviews can address issues like incomplete funding, necessary successor appointments, or coordination with updated tax and benefits planning. Regular check-ins help preserve intended outcomes over time.
