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Irrevocable trust is one estate planning tool

For what reasons might people voluntarily give up all rights to their property? In some cases, those doing estate planning see the benefits of relinquishing their rights to certain assets in order protect their loved ones or reduce the amount of taxable income that is left in an estate after they die. To achieve this, Tennessee residents may place their assets in an irrevocable trust.

An irrevocable trust becomes the owner of any assets funded to it. Because of this, the person funding the trust, who is called the grantor, is not liable for paying estate taxes on the assets in the trust. The trust itself will be liable for the taxes if it contains gifts over the maximum federal gift inclusion. Unlike revocable trusts, once the trust is made and funded, its terms cannot be amended, and its beneficiaries cannot be changed.

For what reasons might people voluntarily give up all rights to their property? In some cases, those doing estate planning see the benefits of relinquishing their rights to certain assets in order protect the assets from family discord, creditors, nursing home costs and estate taxes in order to preserve their assets for their loved ones. To achieve this, Tennessee residents may place their assets in an irrevocable trust.

An irrevocable trust becomes the owner of any assets funded to it. Because of this, the person funding the trust, who is called the grantor, is typically parting with all control over the assets. Thereafter the assets are protected for the benefit of the trust beneficiaries and not subject to claims or estate taxes applicable to the Grantor's estate. Unlike revocable trusts, once the trust is made and funded, its terms cannot be amended, and its beneficiaries cannot be changed.

Such trusts are useful when a grantor wishes to provide for certain family members who may not otherwise be part of the grantor's estate plan, such as children from a prior relationship. Also such trusts provide a receptacle for distributions that may otherwise be transferred to beneficiaries who are disabled or are otherwise unable to handle finances. Additionally, in some states, grantors may use irrevocable trusts to reduce their net worth in order to qualify for Medicaid's long-term care benefits.

Irrevocable trusts are only one way in which someone in Tennessee can protect his or her assets and provide for the future of loved ones in a meaningful way. Since state laws vary and change frequently, discussing estate planning options with an attorney is recommended. An irrevocable trust may be the appropriate tool for many who have particular needs to consider.

Source: everplans.com, "Why Assets In An Irrevocable Trust Aren't Yours Anymore," accessed Aug. 5, 2017

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