What is an Irrevocable Trust and Why Would I Ever Need One?

What is an Irrevocable Trust and Why Would I Ever Need One?

What is an Irrevocable Trust and Why Would I Ever Need One?A trust is a legal entity that can hold assets and, for our purposes, there are two major types of trusts:

  • Revocable trusts
  • Ir-revocable trusts

An “irrevocable” trust is a trust that once you create it and put assets into it, you cannot take those assets out.

Think of a treasure chest where the lid is shut and locked.  Only the “trustee” has the key to open the lid and reach in to get the assets.

A revocable trust is one where the lid remains open so you can put assets in and you can take them out.

You can use an “irrevocable” trust when you need to give up ownership of certain assets in order to qualify for either Alabama Medicaid or to qualify for VA Pension (Aid & Attendance).

Qualifying for one of these benefits can make all the difference in the world for a family facing (or who in the future will face) long term care costs that can destroy a family’s wealth.

These two government benefits are very powerful and useful but they do have “asset” or “resource” limitations.

But if you have given up control and ownership of the assets — by putting them into the right type of trust at the right time in the right way — then the government will consider these assets to not be yours so that you may can qualify for one or both of these benefits.

(These types of trusts are also wonderful to protect assets and make sure they go to your children or whoever you want them to go to without the danger of the assets being taken in a divorce or a lawsuit.

We’ll discuss this in a follow up article.)

The “danger” of using this type of trust is you truly do give up control and ownership — or else the asset is still yours.

So the one you give control to — the “trustee” — needs to be someone you have great confidence and trust in.

And under Alabama Medicaid there are some restrictions on the timing of giving away assets that we reference at the bottom of this article.

Feel free to get in touch with us if you have any questions.

If you have questions about how to use this type of trust to help you, then give us a call at 1-205-879-2447.

We help people all over the state of Alabama.

You can also  fill out the contact form and we will call or email you back.

We will be glad to help you in any way you can.

Thanks for reading, and have a great day!

-John G. Watts

Further Resources:

Here are some additional articles that you might find interesting to read that expand on some of the concepts mentioned in this article:

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