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“Guys. Paul rabelais. Here here to address the sometimes confusing topic. Too many of can can an irrevocable trust be changed or amended scare.
Some people sometimes. But it may need to all trusts are either can either be classified as revocable trusts or irrevocable trusts in by far. The most popular form of the revocable trust with an r is this avoid probate revocable living trusts. Where you stay in and control of everything that you have but when you pass away nothing s frozen.
The family doesn t have to go through attorney in court involvement to gain access to assets. So there s a lot written and said and videoed about revocable living trusts and avoided voiding probate that s not the topic of this video. However some trusts are what s called irrevocable trusts. And they re done for maybe.
Several different reasons. Sometimes a revocable trust. These days are done to avoid taxes sometimes they re done to avoid losing assets. If you get sued.
Sometimes people create your revocable trust. Because they worry that if they get suit get sick and go into a nursing home. They ll have to lose they ll lose everything they have their home and life savings. Because of the you know significant nursing home expenses.
Those are all valid concerns now. The word irrevocable trust scares. Many people. But it may not need to somebody can establish or you can establish an irrevocable trust.
But you can reserve the right in that irrevocable trust to modify certain terms of the trust. Even after the trust is created let me give an example let s say a parent will call a parent. The set lor of a trust every every trust has a set lor and sometimes it s called a grantor or a trust or i like the word set lor because i usually describe it as the person who set up the trust. So the parent is the set lor and he wants to put assets in a trust.
Maybe cash or investments or a real estate. Really doesn t matter and as he s creating that trust working with an attorney. He says well. I m aim x.
As the trustee of my trust and x might be himself. It might be an adult child or children might be another individual might be a corporate trustee and then he goes on in the trust to say that i name y z. As the principal beneficiary of my trust and then he goes on to state that when the set lord dies. All the trust terminates and all trust assets at that time were to be dispersed to the principal beneficiaries and maybe he even says that during the settlers lifetime.
The trustee has the ability or discretion to make distributions of trust assets to those principal beneficiaries and then the irrevocable trust goes on to say a couple of other things. It says that for example this in this irrevocable trust. It says that the set lor has the right to change who the trustee is so now we ve got an irrevocable trust with the set lor having the right to change. The trustee.
And maybe it goes on further to say say that the set lor has the right to change who the principal beneficiaries are so now we ve got an irrevocable trust scary word. Means you can t change anything. But within that irrevocable trust. The settler has expressly reserved the right to change certain provisions of that trust.
But there are still some provisions of that trust that the set lor cannot under any circumstances. You know change or modify. Now. Let me give you a little bit more background.
Because there s been a transition. An irrevocable trust over the last couple of decades back in the 90s virtually every irrevocable trust not every. But the significant percentage of irrevocable trusts were set up to help families avoid estate tax because back in the 90s and in the early 90s. The federal estate tax exemption was six hundred thousand dollars so when someone died with assets in excess of 600000.
And value in their estate. When they died. There d be an estate tax of up to fifty five percent of the value of the assets in excess of six hundred thousand dollars. So many many people created irrevocable trusts in order to remove assets from their estate within gift and estate tax guidelines.
But as a result of that the assets in their trust would not be subject to the 55 estate tax when they passed away in those trusts that were designed to avoid estate estate tax. The settlor almost never reserve the right to modify or change any of those irrevocable trust provisions for fear that those assets would get clawed back into the estate taxable estate of the set law because those estate tax rules are very very particular and you have to really cut all ties to those assets that you put in trust today however with an estate tax exemption of eleven point four million dollars per estate and really with married couples and with something fairly new that we have called portability. It s pretty simple for married couples to exempt two times the estate tax exemption or in today 22 point eight million dollars married couples can have that much that large of an estate and there ll be zero estate tax. So we see very few irrevocable trusts being set up to avoid estate tax.
Because people just don t have to get the assets out of the estate. So we re seeing irrevocable trusts for different reasons. Yes. We re seeing some irrevocable trusts being set up for tax purposes.
We re seeing some irrevocable trusts set up so that people who fear that they will be sued. And that a judgement will be rendered against them and they ll lose everything sometimes they will transfer assets to an irrevocable trust. There s a whole body of work there that people need to understand and then another reason people set up irrevocable trusts is because they fear that if they get sick and go into a nursing home that they ll be forced to you know spend their life savings and ultimately lose their home so as long as those rules are followed and things are done timely the right way. Then people protect what they have but you know really careful wording is necessary depending.
Upon what your goals and your objectives. Are and what protections you need and and what control you want to have over those assets once they are in that trust. So the summary is yes. When someone is considering putting assets in an irrevocable trust.
Initially that s a scary proposition. Because people think irrevocable fixed can t change it if our circumstances or if we have emergencies or if something unforeseen happens. We re stuck with this irrevocable trust. But people need to understand the next point that if if they re careful and they do it right and they take advantage of the opportunities that they have they can get some of the advantages of an irrevocable trust while maintaining some of the control by reserving that right to modify certain terms of that irrevocable trust.
You know if the circumstances warrant it so hope that helps you know you ve spent a long time. Earning and saving what you have it s for many it s it s time to get in that mode of merely protecting what you have from all of the influences and intrusions that are that people you know risk losing what they have i m paul rabelais. Hope that helps now you go and ” ..
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