Why Would Anyone Give Up Control?
The tradeoff for giving up control is strong legal and financial protection:
- Creditor protection: Assets in an irrevocable trust are generally beyond the reach of your personal creditors
- Estate tax reduction: Removing assets from your estate may lower estate tax for high-net-worth families
- Medicaid/ALTCS eligibility: A properly structured irrevocable trust can help with qualifying for Arizona's long-term care aid (strict timing rules apply)
- Life insurance planning: An Irrevocable Life Insurance Trust (ILIT) keeps life insurance proceeds out of your taxable estate
Revocable vs. Irrevocable: When Each Makes Sense
Most Arizona families start with a revocable living trust. It avoids probate and protects against incapacity while keeping full control. Irrevocable trusts serve specific purposes. These include Medicaid planning, estate tax strategies, or protecting large life insurance policies. Your estate planning team can help decide if an irrevocable trust fits your situation.