Do Irrevocable Trusts Really Protect You?
This is now officially QUESTION #1 coming in from visitors to my website! Apparently the new word on the street is that if you are in trouble and want to protect your assets, just give them all away! And better yet, give them away in this incredible vehicle called an Irrevocable Trust, which allows you to still have some control over what gets done with those assets and how.
And I must admit that this sounds like a great plan. I mean why not, especially if the objects of my generosity are my very own children or other close family members. On top of that, this type of protection can cost as little as FREE if you just transfer the assets outright. Even if you do want to have some control and use an Irrevocable Trust, since it is a simple domestic trust the cost can often run anywhere from $2,500 – $7,500 (pretty reasonable when you are talking about asset protection).
This does sound pretty good, so is there a catch? The answer is YES, there is a big catch. Consider the following:
- Giving all of your assets away out of the blue to your children, spouse or family is simply not a normal thing to do.
- When a judge sees that happen (outright or in an irrevocable trust) he/she will make a presumption that the gift was made to delay, hinder or defraud a creditor.
- This exposes the entire gift to a clawback by a judge.
- If the gift was outright, then the judge may simply bring it back (i.e. take it away from whomever you gave it to).
- If the gift was through an Irrevocable Trust, then the judge may invalidate the trust completely and remand the funds to the court, leaving you in a worse position then prior to the gift. (Worse because the job of finding and collecting all the assets has already been done for the court and the court doesn’t even need to take the assets away from you).
You can create an Irrevocable Trust, fund that trust, complete the gift, and leave all the assets right here in the good old USA. And if you follow the logic, and do not understand how the law really works, you may think that taking the time and effort to use an Irrevocable Trust somehow protects them in front of a judge. The irony is that often this just makes the job of the court and a creditor EASIER. You might as well just put a bow on that basket.
The Difference with a Full Asset Protection Plan
The most important difference is that in a true and well-structured asset protection plan, there is not a blatant gift made in the face of a creditor. In fact, this is a case where less is more. By taking legitimate steps to structure your estate and asset plan, you may move certain assets to legal tools such as The Bridge Trust® without these transfers either being, or possibly even more important, appearing, to be a clear violation of the fraudulent conveyance laws.
While giving everything you have away is not a normal action at all, moving assets into legitimate business and estate planning tools IS a normal action for someone to do, even when faced with a crisis. This is the key difference between the two strategies and makes all the difference when it comes to how a court will view your actions.
While The Bridge Trust® is irrevocable, it is a type of irrevocability in which you haven’t actually given your assets away. You remain the beneficiary of this trust and retain direct control until the assets are truly threatened. And if this trust is ever challenged you have the additional security of moving your assets away from the U.S. court, judge and jury (not available if you do a normal irrevocable trust).
To understand how an irrevocable trust really works, I recommend reviewing Key Concepts of Asset Protection #3: Irrevocability here:
Take Your Asset Protection Planning Seriously
The bottom line is that if you are serious about protecting your wealth, do your research online, and then when you think you understand the basics, or when you have reached the point where you are really confused by all of the conflicting information, pick up the phone and call the most expirienced attorney in this area (1-800-231-7112). It need not be me or my firm, but I strongly encourage you to call someone who can walk you through this. Remember, you are dealing with an incredibly important personal planning decision which affects your whole family, and going it alone is not a good option.
I recommend that you ask yourself what your goals truly are. If your answer is that you really want to protect your wealth, then I suggest you take a pass on any option which offers only the illusion of security and choose the one which will provide you with true protection.
can i give my sons liens on my rental propertys for asset protection
“friendly” liens may be of some value in misdirecting a casual inquiry, but unless there is an actual economic value that substantiates the lien, you should not have the expectation that it will truly protect the property in a full blown litigation.
Can you do an irrevocable trust for you home alone??
Yes you can create a trust designed to hold only your home.
I wish to remove my son as the trustee on my estate (worth about 400k) I’m in my eighties, and no longer have a copy of the trust which he took from my home when I was in the hospital. I don’t know if it was a revocable or irrevocable trust since it was drawn up over ten years ago. He is no longer a person I trust … or whom I want to inherit my property. Are trusts recorded by the county or state? I don’t have the original attorney’s name/address, etc. What can I do?
My uncle passed away leaving me as trustee of a small irrevocable trust (money only). A small amount of money is sent to my disabled cousin monthly. She is now in a nursing home paid for by a large insurance policy left by her son. The state of CA has contacted me and wants me to resign as trustee so they can take control of the trust. Can they legally do this? The trust is not in her name.
This depends on the terms of the Trust. I recommend you contact a local attorney to have your trust reviewed.
My purpose of making an irevocable trust is to avoid paying for expenses that I will have to pay, when I have to go to a retirement home. I want to leave all the money, for my son and Medicaid to pay all my expenses? This is the advice they have given me some people. Are hey right?
Luis Faleiro- March-12@11PM
My father’s (age 77) wife (age 58) of 2 years, who happens to be an inactive atty, transferred his 3 properties , w no mortgages, into an irrevocable trust, with her as trustee, and her 2 kids as beneficiaries. He has business building with $230k mortgage but w $60k late payments and $30k unpaid taxes. She has told him now she’s leaving. He is ailing in health, memory, hearing, eyesight, and is desperate to save his marriage (she also has drinking problem and hasn’t worked in 5yrs). Is there any recourse for me to take legally ?
There may be recourse, this is a case were you should contact an attorney in your area who works in elder law and is familiar with elder abuse claims. Act quickly if you intend to pursue any action.
I have 2 living 92 year old parents that live in their home . My 66 yr old brother has lived with my parents and cared for them until a year ago when their needs increased and we had to have 24 hr care. He continues to live there
My parents wishes are that my brother continue living in their home. Money will be running out soon and within the year they will have to go to a nursing home. We will be a cash customer upon entry but will need to go on Medicaid when money runs out.
I have been advised to put the house in a irrevocable trust so the house will not have to be sold to get Medicaid. MY brother is on disability and I am told that Medicaid would allow this
Any other options available.
Medicaid planning is possible, and I suggest you seek the counsel of a Medicaid Atty in your area. This is a unique area and I recommend you use someone familiar with this planning local to you.
How many trustees are required for an Irrovocable Trust asset Protection Plan? Should a Trust company be considered as a trustee or someone who can has a professional understanding of the trust?
One Trustee is required and yes you should consider a professional. However, it depends entirely on how the trust is drafted and there is not one answer. As with much of the law, it depends. I would recommend you speak with an attorney who can give you a full analysis of your situation and make a recommendation to you.
My parents have an irrevocable trust. Can a nursing home take the assets in the trust if they have
had this trust for over five years?
Depends on how the Trust was drafted.
My husband has suffered a small stroke recently. Now we are concerned that should he need a nursing home at sometime in the future and goes on Medicaid the State of Florida can take our assets which are very small and in both names. Can they do that?
This is a special area of planning and you should look for a medicaid planning attorney in your area.
Can someone put a condo in a trust if there is still a mortgage?
Yes, the condo title can be change and still remain subject to the mortgage.
I have no real estate, but have considerable money in the market and 401k.how do i protect my money from medical expenses so that my children might still have an heritance
I have a small business in which I received an SBA loan for with my house and cars as collateral. I also signed a lease for the business location with a personal guarantee. If my business should go under, who is entitled to my assets, the bank or the landlord? How can I protect my assets from them if the business does fail?
my mom has two accounts that are in irrevocable trusts. My question. If she needs the money can she use it without penalty and if she uses one account does that effect the other in any way
I would need more information on your question “If she needs the money can she use it without penalty and if she uses one account does that effect the other in any way” It depends on the terms of the Trust, but if its just 2 accounts in the same trust, then it would all be considered trust assets.
Can the Grantor of an Irrevocable Trust also be a beneficiary? In other words, restricted from touching the principal, but getting the interest income?
Yes a Grantor may also be a beneficiary of an irrevocable trust. And yes, the trust may be set up to allow for access in virtually any combination of income or principal, guaranteed or discretionary. How you set it up depends on your goals for the trust.
My husband was in an accident over 25 years ago. Due to his condition at the time, his mother took the insurance money and put it in an irrevocable trust that she controls. She says it’s her money and wont change/add people to be in charge of it that my husband wants. Is there any way for him to have this trust revoked and be in control of his money?
My parents are elderly. They have several hundred thousand dollars in liquid assets, and own a home, of which I am listed as an owner. If something were to happen to my marriage, which trust would better protect me against having to divide these assets in case of divorce?
Your parents can leave you their assets in a spendthrift trust which would be exempt from claims of your spouse in the event of your divorce. This should be set up now, while your parents are alive.
My Mother (and Father now deceased) has land and a house in Kentucky. Their wish was to leave the house to me and the land to my brother. My brother’s house adjoins the property and he has used the land freely for 25 + years. I live in another state. An attorney in Kentucky advised us against putting the house and the land in trusts to myself and my brother. He said just have my Mother make up a new will leaving the house with lot (which we had surveyed) and land to me and my brother.
What would be my advantage in having the house put in an Asset Protection Trust. If my Mother were to require nursing home care or assisted living, would this protect me? I also want to make certain my Mother can live in the house as long as she is able.
Would a group that wants to manage assets developed by an artist to pay back former lenders use an irrevocable trust organization?
We have a revokable living trust and my husband and I are the trustees at present. When we die my son will be the trustee. We want to protect our house, antique car, automobiles, possessions, collectibles. What is the best way to protect these so if we should ever get sued they cannot touch these things. Oh and all our bank accounts are also under the living trust.
I was surprised that a living trust did not protect our assets well enough. My husband is a realtor and who knows what crazy people might do or say we did that they would try to conger up a suit against us for.
Many people have the belief that a Revocable Living Trust (RLT) protects assets from lawsuits. They do not in any way! Because they are revocable, the judge has the power to require you to revoke the trust and turn the assets over to the court – therefore NO PROTECTION. If you do want protection you may use various tools discussed on this site, including LLC’s, Limited Partnerships and The Bridge Trust.
who can be the executior of an irevocable trust . can it be a child or grandchild
All trusts, whether revocable or irrevocable, have the following three “parties”: 1. Grantor/settlor (creates trust, contributes property) 2. Trustee (manages property, holds title to assets) 3. Beneficiary (benefits from trust property). I believe you mean to ask about an “executor” (a.k.a. “personal representative”) which is the person that administers a Last Will & Testament when the testator of the will dies. The closest trust equivalent of “executor” is Trustee. In both cases, this person (or entity) is in a position of elevated responsibility, and therefore cannot be a minor. As long as a child or grandchild has attained the age of majority and is capable and willing to perform the duties of executor or trustee, you should feel free to appoint them to these roles.
my father gifted me and one of my brothers 400,000 each in 2007. there was a letter that protected the money from long term care protection. Dad left over 900,000 in his accounts to pay for medical and nursing home care. my dad died in 2014. my 3rd brother was not gifted any money because he was not part of the family for about 15 years before dad died. Dad and mom did not include him in the gifting. my question is this – does my brother have any legal rights to this money? is there something that I need to do to further protect my gift? I have the money in cd’s in my bank.
The quick answer is that you probably do not have to worry about potential claims by your brother on these assets, however, the devil is in the details! Each of the conveyances, along with any related documentation, would need to be examined by a local attorney to assess your specific level of potential exposure. I would recommend you consult with a couple of local attorneys with a strong background in estate planning and probate litigation and work with the one you feel most comfortable with.
My husband put his home in an irrevocable life trust to his youngest daughter which says he can do what ever he wants with the home, like rent it or what ever. She got made at us am told us to pack up and move, which we did, kinda. We are work campers and because the children kept vandalizing the property we emptied the home out. Now she is taking us to court to take it away saying we abandoned it. Do you think she can do that. We have no money for attorneys.
I have an irrevocable trust for my mentally challenged cousin whom I take care of, along with her 99 year-old mother. I have a POA for her mother; however, I do not currently have one for her daughter for whom I hold the irrevocable trust. Do I need a POA for my cousin along with the trust?
Can we sell a 2 Family house in LI, NY where we reside from an Irrevocable Trust and purchase 2 income producing condos in Florida and reside there. Would these properties still be part of the Trust ?
Grantor transferred a mortgage (received from sale of her home to her children) to an irrevocable trust with an expressed provision that Grantor NOT receive any distribution from the trust, whether income or principal. Grantor paid personal expenses from the trust and later reimbursed trust. Is this Trust voidable?
As with all answers, facts are critical and I would need more to fully answer. But to generally answer your question, the trust is not void, or voidable because of a failure by the trustee in terms of protocol. It is a factor if a judge were to be judging the trust and could be cited when determining to void the trust. Many more issues come into plan, and I would recommend a more detailed conversation to discuss with an attorney.
My grandparents had a Revocable Trust to insure that their estate was divided equally among their 3 children. Once my grandmother passed away, the Trust became IRREVOCABLE.
MYy Dad (their oldest child) is deceased – so his 1/3 would go to his children. Now my Aunt and Uncle (his brother & sister) think that they are entitled to Everything and that my brother & I (the deceased brother’s) children should be left out. So, they have now taken the Trust and changed it into a REVOCABLE Trust (according to them).
However, I pulled the county records and now see that they have changed the title on my grandfather’s home from the Trust over to their personal names. Their individual names show as the owner of his home.
They are very greedy and go to great measures to leave my Father out of things. My grandparent’s had the initial Trust drawn up to protect my Dad’s part.
What can I do to make them prove that they did this “legally”? AND – if they did NOT do it legally, what can I do to make sure it’s changed back to the Trust and how my grandparents wanted it.??l
You need to seek the help of an attorney in your area who deals with probate litigation matters. There is a process for this, but I definitely recommend you get assistance.
can an irrevocable trust be broken. this trust is in Indiania and was made back in the 60
It greatly depends. Generally irrevocable trusts are very strong and if set up and maintained properly will be stay in force. If you have a specific question, you may want to seek the counsel of an attorney in your area.
My mother has a irrevocable trust. my sister and I are listed as Trustees. My Mom sold her house on Real Estate Contact and still has some land. She needs to go on medicade and into a nursing home and her trust is only a year and seven months old. I’m on disability can the property be moved into my name to protect it? I live in Indiana.
This area of law is complicated and I recommend that you seek the counsel of a Medicaid Planning Specialist attorney. There may be something you can do, but timing is critical.
i am in a special needs irrevocable trust, which sounds like, i as beneficiary, can not change it. however, i thought i read on line under the definition, just the opposite-that i, as beneficiary, was the one who could change it. am i wrong?
The trust document itself determines how and under what circumstances it can be changed. You need to have it reviewed by an attorney in your area that is familiar with this area of law and the law of your state.
There are three trustee’s in my family. Both my parents are deceased. They created two Irrevocable Trusts for two different states, NH and SC because they own two properties in those states.
An attorney sent a letter to me as being one of the beneficiaries (there are 5 living now), outlining that Under Amendment rule (4B), the Trustees are “directed” to consult with all the beneficiaries in making any determination relating to the sale, rental, improvement or alteration of any real estate held by the Trust….”. The Trust further states: “However, all decisions as to such matters are to remain in the sole discretion of the Trustee” Trustee in this context means all Trustees.
I have a few questions:
1. In the latter half of that rule above. Does this mean the said Trustees are supposed to send me any correspondence regarding the sale of said properties, such as market analysis, comparative market analysis of other homes in the area, and the offer letter (NH property (which is a lake house), which is being sold to one of the Trustees). Does this mean the beneficiaries are supposed to sign this ‘offer letter’ agreeing to the sale price, because this property is considered an asset of said Trust? Or does this mean ONLY the Trustees have the authority to sign the ‘offer letter’ and not include the beneficiaries? Same with a purchase and sales agreement for the SC property (which is going on the open market), do the beneficiaries need to sign this agreement as well, or only the Trustees have the authority to sign the agreement? Should the beneficiaries get a copy of the offer letter and purchase and sales agreement for proof of purchase, seeing that it is part of our inheritance?
2. Can the Trustees alter an Irrevocable Trust to claim ownership said properties above, instead of them being an assets of the Trusts? Can they decide not to sell these properties at all and keep them themselves, and not dispose of these assets and disposit the money from the sale of said properties into the trusts for the benefit of the beneficiaries? They are stated as assets of these Irrevocable Trusts? Most of our inheritance comes from the properties, and very little value in the small assets such as furniture, televisions, china, jewelry, etc remain or the Trustees took before my parents died.
Please note: These Trustees are not struggling financially, but I am. They are taking advantage of my financial situation, and think I wont get an attorney. Which isn’t the case, if I feel I have a fighting chance.
They are closing these properties in a week. I was never sent anything to sign in agreement to, nor do I know the price of the sales.
Help,
Robina
Trustees are bound by the terms of the Trust itself. What they can do and what they must do are outlined in the Trust Document. I recommend that you have that document reviewed by a competent attorney in your area to help you determine what is really happening. And no, the Trustee cannot unilaterally seize the assets of a trust for themselves – they must follow the terms of the Trust and are under a fiduciary duty to do so.
So then what is “true protection” ? Please discuss in more detail and please be very specific as to how and what should be done.
Thx
“True Asset Protection” when I refer to it is the capacity to REMOVE the assets from the jurisdiction of a legal threat. This is done using the Bridge Trust, and int he event of a serious threat to your assets, the Trust can be triggered and the assets physically removed from threat.
I live In New York State and I don’t want my relatives burden with estate tax after my death. I have a little savings but most of my assets are furniture and clothing so my question is what would be the best option for me.
If your assets total less than $5 million then you will not be burdening anyone with an estate tax issue. I suggest you complete a simple estate plan via a will or Revocable Living Trust with an attorney in your area.
Do heirs have to pay inheritance tax on assets received from a Trustee when she dies?
The estate of the person dying is responsible for the estate taxes if that estate exceeds the Unified Credit Amount (Currently $5,340,000 in 2014). IF the estate exceeds that amount, then the estate would pay the tax, which would reduce the amount available to the beneficiaries.
how can I keep medi-cal from taking my home away from my brother
He should seek the counsel of a Medicaid Planning attorney in your state.
My mother has Alzheimer’s and eventually will need to go to a facility that will take care of her so we, my father and I, have been looking into putting his assets, ($1,000,000.00+, real estate), into an irrevocable trust.
Questions
If he does this would it change his property taxes on those properties he put into the trust?
How can we include other trust documents, ie., medical directive, power of attorney for dad, etc?
Right now dad’s trust has him alone as trustee and my mother only as a beneficiary.
Property is in San Luis obispo county, California.
Thanks
You do have some planning opportunities, but should seek counsel in California to set up the appropriate structures.
can the trustee of an irrevocable trust sell the property after 5 years and use the money for college for her daughter .
If the Trust document allows for that, then yes.
Can in irrevocable trust protect my home from bank reposession?
If the bank has a lien on the property, transferring it into an irrevocable trust will not remove the threat of foreclosure.
How is the trustees financial status affected in an irrevocable trust. For example , tax status.
Thanks
There is no effect on the Trustees personal taxes in a trust, unless the Trustee is also a beneficiary or a Settlor. If the Trustee is purely serving as a fiduciary of the Trust, then only the compensation received in that capacity would be taxable income to the Trustee.
I own farm ground and have it in a trust. It goes to my daughter after my husband and I have passed. It goes to my grandson after my daughter passes. How do I ensure that the property taxes get paid on this land without making a bank the surviving trustee? I can’t really get a straight answer but gather that it would cost thousands a year for a bank to act and trustee just to pay the property taxes and direct the income to my daughter.
The Trustee is responsible for paying property taxes on the farm as an asset of the Trust. As long as you choose a responsible Trustee who does indeed pay the taxes, then there is no need for a specific bank to act as trustee.
We have an Irrevocable Trust set up for my in-law. They both live in Assisted Living. He has had a stroke and she has Parkinsons. They are both in wheelchairs and we have trouble transporting them to Dr. appt. and such. Are we able to buy a Wheelchair Van using the trust funds and can we title it with the trust name? We live in KY
If the terms of the trust allow for this, then yes. Read the Trust document and if it is not clear, get a legal opinion about what the Trust is allowed to do.
I presently have a revocable trust. My husband is in a alzheimers and is in a facility. I have a son
that lives in Tennessee. In order to collect benefits from the Veterans I will have to have a
irrevocable trust. I would receive 2000.80 per month if I do this. I am scared and know nothing
about the in and out of that type of trust. HELP!
Seek local counsel in your area. This should not be intimidating, and there is nothing scary about an irrevocable trust is set up properly.
My question is I have an irrevocable trust because im disable an expecting a settlement from a lawsuit but i did get a loan from a company that lend you money if your waiting to settle on lawsuit can i put the settlement fund into my irrevocable and can this company out a lien on the trust account since i owe them which i borrow 2,000.00 dollars now it seems im paying 18,000.00 back what can i do i don’t mind paying 2,000 back or even 6,000 but 18,000 what can i do any suggestion please help me to understand thank you
IF you borrowed $2,000 and agreed to pay back $18,000, then you are bound by the terms of that loan agreement. As such I would guess that the lender has a direct lien against your settlement and putting it into a trust will not have any effect. If you are in doubt about the legitimacy of the loan, seek out an attorney in your area for an opinion.
i was made trustee of grand daughter trust that my lawyer made the dad put in for 200,000. I had full custody for 8 years. dad got married again and chose his own trustee without the court judge knowledge. spent 75% of money for his personal needs although he made millions with Atlanta braves. grand daughter had to drop college since he never paid on time. judge wrote me letter when he found out. could I have filed a suit to recover?
Possibly, seek out counsel in your area to give you an opinion.
Hi, my grandfather has an irrevocable trust with several different lots of land. The trustee is my mother and the beneficiaries are my uncle and her. My wife and I want to build next to my grandfather who is still alive. Is it possible to remove 5 acres of land if everyone agrees to it?
Very likely, if everyone involved consents, and the trust allows for it, then it is possible.
With a APT, can I have a provision in there that states my adult son can live in the house after I pass and after HIS passing, the home will be left to other family members
Yes these types of provisions can be added to an APT to protect the assets while providing for the use of the assets to certain beneficiaries during their life.
Iam getting a divorce and my mother in law put my name on one of these trusts.. What r my rights and can she take it away?
Andi,
It all depends on the drafting of the trust. However, generally the beneficiaries can be changed and unless you have ‘vested’ then she would be free to remove you as a beneficiary. Being a potential or ‘unvested’ beneficiary does not give you any particular rights. If you had a copy of the Trust this could be confirmed.
My sister was the trustee for a blind trust in my mothers name. Upon my mothers death, the assists were to be divided among the surviving children. My mother died in January of 2014. My sister had not spoken to her in five years and does not speak to my brother or me.
How can we discover the trust to see if there is any money left that my sister did not steal?
Lauren,
You would need a copy of the Trust and have it reviewed. You likely have a right to see that as a child and I would suggest you find local counsel to where your mother’s estate was probated and seek advice.
How do I get an irrevocabal Trust that I can not afford?
I read that you all have a program to take care of me not being able to afford this kind of Trust.
James,
Trusts come in all types and at all price points. We focus on Asset Protection and these are sophisticated trusts that use dual jurisdictions to protect assets. If your assets are not at that level then you likely need a much more basic trust, and a local trust and estate attorney is your best bet.
I am trustee and beneficiary of a house that was put into an irrevocable trust for us kids 18 years ago. My Mom has died and we are selling the house. How and what taxes do I pay when we sell the house?. We have a tax id number but have never used it.
This is an excellent question for your CPA. The answer depends on several factors which need to be looked at within the context of your situation.