People who are creating an estate plan have various options they can use to ensure their assets are passed to their intended beneficiaries. One of these is trusts, which are set up as either revocable or irrevocable.
A revocable trust is one that the creator can change as they feel necessary, but those changes aren’t possible for an irrevocable trust. When a person establishes an irrevocable trust, they hand over control of the trust and assets to a trustee. The creator can’t change or cancel an irrevocable trust unless they get permission from the court or all named beneficiaries.
Why would someone want an irrevocable trust?
In exchange for the permanency of the trust, there are very specific benefits that come with this type of trust. One of the most important for some people is that the assets within the trust are protected from the creator’s creditors. This means that the creator can pass down more of their wealth to their beneficiaries.
Another benefit that’s present is that the assets within the trust are removed from the creator’s estate. This could mean reductions in the applicable taxes, so more of the assets are passed down to the beneficiaries.
An irrevocable trust also comes with privacy for the beneficiaries. Trusts don’t have to go through the probate process, so the terms aren’t entered into the public record. Bypassing the probate process can also mean the beneficiaries receive their inheritance in a more efficient manner.
Setting up an irrevocable trust as part of a comprehensive estate plan must be done in accordance with applicable laws. It may be beneficial to work with someone familiar with these matters so they can ensure that it’s handled properly.