What is an irrevocable trust?
The only constant in life is change. And, as we have discussed in previous posts, life changes should be reflected in your estate. Despite containing the word “irrevocable,” an irrevocable trust can be altered using what the industry calls “decanting” the original trust.
Decanting is essentially a “do-over”
Estate attorneys decant a trust when they move funds from an existing trust (which has less favorable terms) to a new trust (with more favorable terms). As the name implies, estate decanting is like the term applied to wine. With the latter, a decanter transfers wine from one bottle to another, leaving the unwanted sediment in the original bottle. In the same way, when decanting an irrevocable trust, estate attorneys figuratively pour the contents from one trust to another, leaving behind the undesirable terms.
Since an Irrevocable Trust offers dual benefits of potentially reducing estate taxes while currently transferring wealth, in exchange for these benefits, the grantor relinquishes the ability to amend and revoke the trust. However, despite that the trust is irrevocable, it is not immutable, which means it can be modified to adapt to changes in circumstances.
How to Decant a Trust
Your experienced Southern California estate attorney will meet with you to determine the ways that your estate has changed. For example, as you age – before you require long-term care, an irrevocable trust should be prepared which includes your house. This is because officials working for California’s income-based state healthcare system, Medi-Cal, do not count assets relative to real estate in irrevocable trusts when determining eligibility. So, if the home is moved into an irrevocable trust, long-term care could potentially be provided without tapping into the home’s equity.
Your experienced estate attorney will prepare necessary documentation to decant the trust in such a way, by “pouring” assets into a trust that has more favorable terms. While this can be done in several different ways, the most common are by deed, assignment, change of owner/ beneficiary forms, and the creation of new accounts.
Keeping your estate planning binder secure and up to date will reduce confusion as well as the likelihood of disputes. Whatever your circumstances, rest assured that the professionals at Skvarna Law can help you to determine the best way to handle your trust. Skvarna Law Firm operates offices in Glendora and Upland, California and provides legal services for individuals living in San Bernardino, Los Angeles, Orange and Riverside Counties. This includes the cities of Upland, Ontario, Rancho Cucamonga, Fontana, Colton, Rialto, Chino, Chino Hills, Glendora, Claremont, Montclair, Pomona, La Verne, San Dimas, Azusa, Covina, West Covina, Diamond Bar, Walnut, La Puente, Corona, Norco & Mira Loma. Visit SkvarnaLaw.com to learn more.