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Anthony J. Bardi
Registered Representative
Enrolled Agent, LTC# 454
Tax and Financial Solutions, Inc.
151 SE 223rd Avenue
Gresham, OR 97030
Phone: 503-666-7909
January/February 2024
Irrevocable Trust: You Can't Take It Back
By transferring assets into an irrevocable trust, you permanently give up control and ownership of those assets. The trust owns the assets for the benefit of the beneficiaries you have named. There are two main types of irrevocable trusts. A living trust is established and funded during your lifetime. A testamentary trust is created after your death and funded from your estate according to the terms of your will.
Why Create an Irrevocable Trust?
Typical reasons for setting up an irrevocable trust are for wealthy individuals to minimize estate taxes, to “spend down” assets to become eligible for government programs, such as Medicaid; or to protect assets from creditors. An irrevocable trust can also help avoid probate and allow you to make arrangements in advance if you become incapacitated.How the Trust Is Created
As the grantor, you establish the trust, designate someone to act as trustee, and name the beneficiary (or beneficiaries) who will eventually receive the trust assets. Once you have transferred assets into the trust, you surrender your ownership rights and hand over control to the trustee, who will oversee the trust and the distribution of its assets. Assets held in the trust can include cash, stocks, bonds, real estate, a closely held business, life insurance policies, and other property and investments.The Downside of Irrevocable Trusts
Once the assets are transferred, the trust generally cannot be changed or terminated. This means you cannot remove or change the beneficiaries named in the trust, even if you no longer want a beneficiary to receive the assets. You also cannot regain control of any trust assets should you need those assets in the future.A New Ruling
Previously, assets in an irrevocable trust received a step up in basis to their value on the date of the decedent’s death, eliminating capital gains tax. However, IRS Revenue Ruling 2023-2 states that completed gifts to grantor trusts are not eligible for a step-up in basis. Consult your legal and financial professionals to learn how this ruling affects your estate plan.CONTACT US
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Tax and Financial Solutions, Inc. and LTM Client Marketing are unrelated companies. This newsletter was created by LTM Client Marketing and was not written or created by the named financial professional and does not necessarily represent the views and opinions of Avantax Wealth Management® or its subsidiaries.
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