Irrevocable trusts offer some benefits that revocable “living” trusts do not. But those benefits come at a cost.
Before creating any type of irrevocable trust in North Carolina, you need to be aware of certain factors.
Be Sure You Understand the Terms
There’s a reason most people work with an experienced attorney when creating an irrevocable trust. Although North Carolina law has exceptions that allow changes to an of irrevocable trusts, the trust creator may not act unilaterally.
Once you transfer property into a trust, you may not be able to take it back out if you change your mind. You need to make sure you understand what you’re creating and why. You need to be aware of what terms can be changed and what cannot.
Be Sure the Trust Complies with the Rules
Another reason to have a knowledgeable attorney draft the terms of an irrevocable trust is that the trust must comply with all the applicable rules to accomplish the intended purpose. If you are creating a trust to reduce estate tax liability for instance, you must follow all the IRS rules.
If your trust is designed to provide benefits for a family member with special needs, it must comply with rules from the Social Security Administration to avoid damaging the beneficiary’s eligibility for SSI or Medicaid benefits. You can establish a legally binding trust on your own or with the use of online software, but it may not comply with the rules necessary to achieve your goals.
You Will No Longer Own the Property in the Trust
If you have a revocable living trust, you can still control and use all the property in that trust. Technically, the property is held by the trust, but you can take it out and do whatever you want with it. You serve as the trustee to manage it and you get to enjoy the use as the beneficiary.
An irrevocable trust operates much differently. Once you create and fund an irrevocable trust, the property you place in trust leaves your control. It falls under the control of the trustee. If you are a beneficiary, you may receive some proceeds generated by the trust, but you will never have unlimited access to the property within. Rather, the benefits will be distributed in accordance with the terms of the trust and other legal requirements. You won’t decide how to manage that property or whether to liquidate certain types of assets. You have to be willing to give up control.
Change is Allowed in Limited Circumstances
While it may be helpful to think of trust terms being set in stone because they are so hard to change, even stone can be altered when you apply the right tools. Some terms of an irrevocable trust may be amended through the decanting process, for instance. The trustee essentially moves the trust assets to a new trust with different terms. However, the terms cannot be fundamentally different or alter the trust purpose.
Brady Cobin Law Group, PLLC Helps You Achieve Your Goals with Irrevocable Trusts
When properly prepared and funded, irrevocable trusts often provide the best way to protect family members, conserve assets, or provide for future needs. To talk to the experienced team at Brady Cobin Law Group, PLLC about the right trust for your needs, schedule a consultation today.