As an estate planning and elder law attorney, I am often asked "Why Should I Use an Irrevocable Trust in my Alabama Estate Plan?"
My me is Bill Miller and I am an estate planning and elder law attorney in Anniston, Alabama. One of the things that we use frequently in doing planning is an irrevocable trust.
I am often asked by my estate planning clients, "Why would I want to use an irrevocable trust? If I put things in an irrevocable trust I cannot get them back, I cannot
use them." Part of that is correct. The reason to use an irrevocable trust is that once an asset is placed in an irrevocable trust, other entities cannot get their hands on it. If you are in a bad car accident and it is your fault and you get sued for $1 million but your assets are in this trust, you do not own them. The trust owns them and therefore they cannot get those assets if the lawsuit against you is successful.
One of the most common ways, or reasons, to use an irrevocable trust is to protect assets so that Alabama Medicaid will pay for your nursing home care. In Alabama, if you have assets in excess of $2,000 and you have to go into a nursing home, Medicaid is not going to pay for your care. You have to spend your assets down to about $2,000. Again, if you have your assets in an irrevocable trust, then Medicaid cannot count those and would pay for your nursing home care even though you have the assets in the trust.
It is also not true that if you put assets in an irrevocable trust that you cannot touch them. There are some irrevocable trusts that work that way – the ones that are used for tax planning – but 99.7 percent of the population does not have state tax issues. For 99.7% of people, you can use an irrevocable trust and any asset you put in the trust you can still be the trustee; you can still decide what happens to the asset. If you put your house in the trust you can still sell the house or have the trust sell the house. The proceeds stay in trust. You can manage your investment accounts through the irrevocable trust as well. You make all the decisions about how the assets are managed.
The only thing you cannot do is take those assets back out and put them in your name. However, there is not really any reason to ever have to do that. You may still want to be able to get income from the assets in the irrevocable trust, but there is not really any reason to need to get the asset back in your name in most cases. You just name beneficiaries within your trust, and when you pass away the assets go to your beneficiaries just like they would have it you had a will.
There are many uses for irrevocable trusts as part of your Alabama estate plan including probate avoidance and asset protection. There are a lot of misunderstandings out there about them. I encourage you to get more information to see whether using an irrevocable trust could be of benefit to you.
To learn more about estate planning, how to avoid probate and make it easy on your family if something happens to you, click the link to receive a copy of our book on The Basics of Estate Planning in Alabama or visit events.adamsmillerlaw.com/Workshops.html to register for one of our free estate planning workshops or simply call us at 256 251-2137.