When you’re creating your estate plan, you may decide that you want to pass assets down to your loved ones. Many people want to do this as easily as possible.
Trusts are one option that you have when you’re setting up the estate plan. These are classified as either revocable or irrevocable. Remember these points if you’re considering an irrevocable trust for your estate:
It has specific purposes and benefits
An irrevocable trust is a legal arrangement where you transfer assets to a trust, managed by a trustee, for the benefit of your beneficiaries. The terms of this type of trust generally cannot be modified or removed without the permission of the court or the consent of the beneficiaries. One of the biggest benefits is that your creditors can’t touch the assets of the trust.
You do have to accept a loss of control
You must relinquish control over the trust’s assets. The trustee has a fiduciary duty to manage the trust assets in the best interests of the beneficiaries, in accordance with the trust terms. This loss of control can be a drawback for some individuals, but it is essential for achieving the benefits associated with irrevocable trusts.
The tax implications are often beneficial
Irrevocable trusts can offer significant tax advantages for the grantor and beneficiaries. By removing assets from your estate, an irrevocable trust may help to minimize estate taxes upon your death. Additionally, irrevocable trusts can help to reduce or avoid gift taxes when assets are transferred to the trust.
The trust is only part of a comprehensive estate plan. You must ensure that you have the remaining components set in a way that conveys your wishes. Working with someone who can help you do this is crucial.