By Lane V. Erickson, Idaho Estate Planning Attorney
Through the years as I’ve written different articles about Idaho estate planning, I haven’t spent much time talking about irrevocable trusts. The reason for this is that I usually don’t favor using an irrevocable trust as part of a person’s estate plan. I discuss more about the reasons I feel this way below.
I do believe that every person should have at least a basic estate plan which consists of a last will and testament, a durable power of attorney, a living will, and a healthcare power of attorney. For most people, this type of an estate plan is enough to cover everything that needs to be done to protect them while they are alive, to give them the ability to make end-of-life decisions, and to help them create a plan to distribute their money, property, and other assets to their family members and loved ones after they die.
As an estate planning attorney, I also recognize that everyone doesn’t need all the same estate planning documents all the time. In other words, your estate plan should be unique, and meet your own specific needs and circumstances. To determine what your needs are, we encourage you to download our free Estate Planning Questionnaire. This is a PDF document you can download to your computer. You can type your information directly into the document and then save it and email it back to us. We then provide a free 30-minute consultation in person, by phone, or by video conference whichever way you prefer, so we can review your Questionnaire, answer your questions, and discuss your specific needs.
There are times through this process that we find a person does in fact need an irrevocable trust as part of their estate plan. The purpose of this article is to give you a brief summary about what an irrevocable trust is, and whether it might be useful as part of your estate planning.
How is an Irrevocable Trust Different From Other TrustsThere are many kinds of trusts that can be created. Most of these trusts are revocable, which means they can be altered or changed by the person who created the trust anytime that person wants. These types of trusts can also be completely revoked or ended anytime. An irrevocable trust is different.
An irrevocable trust is exactly what it sounds like. Once it is created, and it has been funded by having property or money placed into the trust, then the trust becomes concrete. This means the trust can’t be amended or changed and it cannot be ended other than through the specific directions left in the trust itself.
Because an irrevocable trust cannot be changed or ended after it is created and funded, we find that in most circumstances it’s not a good idea to have one. We like our clients to have flexibility so that if the circumstances in their lives change, they can change their plan to meet their new needs.
When Should an Irrevocable Trust Be ConsideredHowever, there are times when an irrevocable trust should be considered. In a previous article we talk about some of these types of reasons. They include a testamentary trust for minors, a supplemental needs trust for someone who has disabilities, or a trust set up for a family member or loved one who is struggling with addictions or other self-destructive behaviors.
Typically, these types of trusts are only valid once they are funded. Most of our clients fund these types of trusts through their last will and testament once they die. In other words, rather than giving money, property, or other assets directly to their family member or loved ones they place those things in trust for them instead.
Negatives to an Irrevocable TrustThe biggest negative to an irrevocable trust is that you lose control of the property transferred into that trust. If the transfer into the trust occurs after your death, this really is no big deal. However, if you fund an irrevocable trust while you are alive, then you no longer have control over that property. In other words, the trust permanently owns that property and retains permanent control over it until the purpose of the trust is concluded.
Additionally, if your original purpose for an irrevocable trust changes, you are out of luck. For instance, if you leave an inheritance to a certain person in an irrevocable trust, and then you have a breakdown in your relationship with that person, you can’t change your mind about leaving them a distribution. They are permanently a beneficiary of your trust.
The same is true when it comes to whoever you have appointed to be the trustee of your irrevocable trust. If that person suddenly becomes dishonest, or untrustworthy, you cannot change their appointment. Only they can decide whether they are unwilling or unable to serve as a trustee.
For these reasons, unless you are trying to care for a minor age child, or someone with disabilities or self-destructive behaviors, an irrevocable trust may not be the best idea as part of your estate plan. If you have questions or concerns about whether a truss, including an irrevocable trust should be used as part of your estate plan, we can help. We have assisted numerous clients in using trust as part of their estate plan and we are confident we can help you too!
Enlist an Idaho Estate Planning Attorney to Help YouOur team of Idaho lawyers can help you with any of your estate planning or probate needs. Whether you are seeking to create or review an estate plan for yourself or would like to help a loved one, we are available to discuss your options and answer your questions at an initial free 30-minute consultation. Call us toll free at 877-232-6101 or 208-232-6101 for a free consultation. You can also email us directly at lane@racineolson.com or stop by our office at 201 East Center Street, Pocatello, Idaho 83201. We will answer your questions and help you solve your Idaho Estate Planning problems.