Legitimate repositioning (transfer) of assets from you to an irrevocable trust is perfectly legal. The fact is, if your assets are owned by a subchapter S. Corporation or a Limited Liability Company and in turn the shares of the Sub S or membership units of the LLC are owned by an irrevocable trust, it’s the fortress of US Asset Protection. The ultimate asset protection device is the use of an offshore asset protection trust.

The following financial grid explains the major differences between revocable vs. irrevocable trusts:

What’s wrong with a revocable trust (revocable living trust) is that the owner of the assets (the Grantor) retains too much power over the disposition of the trust assets. This direct control nullifies any defenses against potential frivolous lawsuits. His deemed control is equivalent to ownership, and if you still own the asset you are liable to lose them in a lawsuit. And if you own the asset you will incur an estate tax.

The laws of most states permit the formation of a variety of revocable trust instruments (AB “Family” Trust, QTIP Trust, Crummey Trust, Retained Interest Trusts such as GRITS, GRATs, GRUTs, and QPRT), whereby the trust creator (Grantor) contributes assets for the benefit of others to be managed by a Trustee. While it is also possible for the creator to be either the Trustee or a Beneficiary of the trust he or she has created, such dual capacities will usually destroy the trust’s ability to shelter its assets from creditors of the Grantor. When a Grantor reserves an unqualified power of revocation, he or she is deemed the absolute owner of the trust property, as far as the rights of creditors are concerned. This is true even if a Grantor of a trust does not retain a beneficial interest in the trust, but simply reserves the power to revoke it.

Unlike a revocable trust (revocable living trust), assets transferred to an “irrevocable” trust cannot be changed or dissolved by the Grantor once it has been created. The Grantor no longer owns the assets. An independent Trustee is your best defense. With an independent trustee, you generally can’t remove assets, change beneficiaries, or rewrite any of the terms of the trust. An irrevocable trust is a valuable estate-planning tool. First, you transfer assets into the trust-assets you don’t mind losing control over. You may have to pay gift taxes on the value in excess of $1million of the property transferred at the time of transfer or you may be able to set-up a mock sale by using a device known as a private annuity to avoid capital gains taxes.

With an irrevocable trust, all of the property in the trust, plus all future appreciation on the property, is out of your taxable estate. That means your ultimate estate tax liability may be less, resulting in a more tax efficient way to transfer your accumulated wealth to your beneficiaries. Property transferred to your beneficiaries through an irrevocable trust will also avoid probate. As a bonus, property in an irrevocable trust may be protected from your creditors. Of late this irrevocable trust device is being utilized by many planners for avoiding the Medicare nursing home spend-down provisions whereby if the elderly has to enter a nursing home he must first spend all his money until he does not have any money left.

A quick word about the independent trustee: most people don’t like to give up control over their assets because of their perceived notion that giving up control is equivalent to leaving the wolf in charge of the hen house. The law imposes strict obligations and rules on trustees including a duty to account for any benefits the trustee may have gained directly or indirectly from a trust. This goes beyond fraudulent abuse of position by a trustee.

The courts regard a trust as creating a special relationship which places serious and onerous obligations on the trustees. The law regards the special “Fiduciary” relationship of a trust as imposing stringent duties and liabilities on the person in whom confidence is placed – the trustees – in order to prevent possible abuse of that confidence results in a major difference in the revocable vs. irrevocable trust advantages. A trustee is therefore subject to the following rules:

• No private advantage – A trustee is not permitted to use or deal with trust property for direct or indirect private advantages. If necessary the court will hold him personally liable to account for any profits made in breach of this obligation.
• Best interests of beneficiaries – Trustees must exercise all their powers in the best interests of the beneficiaries of the trust.
• Act prudently – Whether or not a trustee is remunerated he must act prudently in the management of trust property and will be liable for breach of trust if, by failing to exercise proper care, the trust fund suffers loss. In the case of a professional, the standard of care which the law imposes is higher. Failure to exercise the requisite level of care will constitute a breach of trust for which the trustee will be liable to compensate the beneficiaries. This duty can extend to supervising the activities of a company in which the trustees hold a controlling interest.

Revocable vs. Irrevocable Trust Advantages: The Legal safeguard of an irrevocable trust:

In cases of substantial assets, you may add one other safety measure, “the Trust Protector.” The trust protector’s sole function is to hire and fire trustees, at will and without explanation. We use limits on how much a trustee can be authorized to spend without a second signature.

Protect your assets for yourself and your children and beneficiaries and save on tax dollars and learn the revocable vs. irrevocable trust advantages. Assets can be protected from frivolous lawsuits while eliminating your estate taxes and probate, and also ensuring superior Medicaid asset protection for both parents and children with our Premium UltraTrust® Irrevocable Trust. Call today at (888) 938-5872 for a free consultation and to learn more.

Top 6 Reasons Why Ultra Trust® Offers Superior Benefits of any Irrevocable Trust