Irrevocable Trusts in Madison, WI

Helping Clients Create Trusts for a Variety of Purposes Throughout Dane County

An irrevocable trust is a trust that cannot be changed or revoked by the person who created it. A revocable trust, on the other hand, can be modified or revoked at any time by the person who created it. When a trust is created, the person who creates it is called the grantor, and the trustee is the person who is responsible for managing the assets in the trust.

When a trust is created, it is important to designate a successor trustee, who will take over if the original trustee is no longer able to fulfill that role. It is also important to designate a backup successor trustee, in case the first backup is no longer able to fulfill that role.

The assets that are held in an irrevocable trust are often referred to as trust property. The trustee is responsible for managing the trust property in the best interests of the beneficiaries of the trust. The trustee is also responsible for paying any taxes that are due on trust property, as well as any expenses that are related to trust property.

Our team of Madison estate planning attorneys can help you determine whether an irrevocable trust is the best option for your situation. We will work with you to create a trust that meets your specific goals, while also taking into account the tax implications and other legal concerns. We can also help you manage your trust after it has been created to ensure that it is meeting your needs.

For more information about irrevocable trusts or to speak with a member of our team, please call (608) 292-5185 or contact us online.

Parties to an Irrevocable Trust

The grantor, the trustee, and the beneficiaries of an irrevocable trust are all considered to be parties to the trust. A trustee who is managing an irrevocable trust must act in good faith and must act only in the best interests of the beneficiaries of the trust. The trustee must also take care to avoid conflicts of interest, and must avoid any self-dealing or other transactions that may be in their own best interests, but may not be in the best interests of the beneficiaries.

Benefits of a Irrevocable Trust

An irrevocable trust can be very useful for a variety of purposes, including:

• Planning for a child's education
• Protecting a family member with special needs
• Providing for a spouse after the death of a spouse
• Managing assets for a disabled person
• Managing assets for a minor
• Managing assets for future generations
• Managing assets for a business
• Preparing for retirement
• Managing assets during a divorce
• Managing assets after a divorce
• Managing assets during incapacity
• Managing assets during a guardianship

Types of Irrevocable Trusts

There are several types of irrevocable trusts, each serving different purposes. Some common types include:

• Irrevocable Life Insurance Trust (ILIT): Used to remove life insurance proceeds from the estate to avoid estate taxes and provide benefits to beneficiaries.
• Charitable Remainder Trust (CRT): Allows individuals to donate assets to charity while retaining income from those assets during their lifetime.
• Special Needs Trust: Designed to provide financial support for a loved one with disabilities without affecting their eligibility for government benefits.
• Medicaid Trust: Often used to protect assets when applying for Medicaid long-term care benefits.

Each of these trusts serves a specific purpose, and the right choice depends on your personal and financial goals.

Why an Irrevocable Trust?

An irrevocable trust is a flexible option that can be used in many different situations. It can be very useful for situations where the assets that are in the trust need to be protected from creditors or in situations where the assets that are in the trust need to be protected from the beneficiaries themselves. An irrevocable trust can also be a good option in situations where the assets in the trust need to be invested in a way that is different from the way that the grantor would have invested them.

An irrevocable trust can be a good option in situations where the grantor needs to retain control over the assets in the trust but does not want to have to worry about the tax implications of taking distributions from the trust. An irrevocable trust can also be a good option in situations where the grantor is concerned about potential beneficiaries who may be irresponsible with money or who may not have the best interests of the trust at heart.

An irrevocable trust can also be a good option in situations where the grantor is concerned about potential beneficiaries who may be minors and who may not have the best interests of the trust at heart. An irrevocable trust can also be a good option in situations where the grantor is concerned about potential beneficiaries who may be minors and who may not have the best interests of the trust at heart.

Irrevocable vs. Revocable Trusts

When considering estate planning tools, it's important to understand the differences between irrevocable trusts and revocable trusts. Both types of trusts allow for the management and distribution of assets, but they serve different purposes and offer distinct advantages and disadvantages.

Revocable Trust

A revocable trust, also known as a living trust, allows the grantor to retain control over the assets placed in the trust. The grantor can modify, amend, or revoke the trust at any time during their lifetime, which makes it more flexible than an irrevocable trust. Key characteristics of a revocable trust include:

• Control: The grantor maintains full control of the assets during their lifetime and can modify the trust terms or revoke it entirely.
• Estate Planning Tool: A revocable trust helps avoid probate, allowing assets to be transferred to beneficiaries without the need for court involvement after death.
• No Tax Benefits: Since the grantor retains control over the assets, they are still considered part of the grantor’s estate for tax purposes.
• No Asset Protection: Creditors can still access assets in a revocable trust, as the grantor maintains control over them.

Irrevocable Trust

In contrast, an irrevocable trust offers the following advantages and disadvantages:

• No Control: The grantor cannot change, amend, or revoke the trust once it is established, which means they lose control over the assets.
• Tax Benefits: Irrevocable trusts can provide significant estate tax savings, as assets are removed from the grantor's estate and are no longer taxed as part of it.
• Asset Protection: Creditors generally cannot access the assets in an irrevocable trust, providing greater protection for the grantor.
• Medicaid Eligibility: Irrevocable trusts are often used to help individuals qualify for Medicaid benefits for long-term care, as the assets in the trust are not counted toward Medicaid eligibility.

Contact Our Madison Irrevocable Trust Lawyers 

Discover if an irrevocable trust suits your needs with our Madison estate planning attorneys. We'll craft a tailored trust, considering taxes and legal matters, and provide ongoing management support.

For more information about irrevocable trusts or to speak with a Madison irrevocable trust lawyer please call (608) 292-5185 or contact us online.

FAQ - Irrevocable Trusts

Can I change or revoke an irrevocable trust?

No, once an irrevocable trust is established, it cannot be changed or revoked without the consent of the beneficiaries or, in rare cases, a court order. This lack of flexibility is one of the primary differences between irrevocable and revocable trusts.

Why would I choose an irrevocable trust?

An irrevocable trust can be beneficial for reducing estate taxes, protecting assets from creditors, and ensuring wealth preservation for future generations. It is also useful in Medicaid planning.

Can I be a trustee of an irrevocable trust?

Yes, you can be named as the trustee of your irrevocable trust, but you will have fiduciary responsibilities to manage the trust according to the terms established and in the best interest of the beneficiaries.

How do I set up an irrevocable trust?

Setting up an irrevocable trust involves several steps, including selecting a trustee, identifying the assets to transfer, drafting the trust document, and executing the trust with the proper legal formalities. Consulting with an experienced estate planning attorney is essential to ensure the trust meets your goals.

What happens to the assets in an irrevocable trust after my death?

Upon your death, the assets in an irrevocable trust will be distributed according to the terms of the trust, bypassing the probate process and ensuring your estate is administered according to your wishes.