Trusts are estate planning tools used to set aside money for a beneficiary (or beneficiaries) to inherit at a specific time, usually upon the passing of the grantor.
Types of TrustsIn estate planning, there are generally two categories of trusts: revocable trusts and irrevocable trusts. Revocable trusts are flexible estate planning tools that enable a grantor to modify the trust over time. Irrevocable trusts, on the other hand, adhere to stricter terms and are unable to be changed once they are established. For this reason, irrevocable trusts are often referred to as fixed trusts.
What Is an Irrevocable Trust?An irrevocable trust is a type of trust that cannot be altered or terminated once it has been established. It is binding from a legal standpoint. Irrevocable trusts can be living trusts or testamentary trusts. Living trusts are established during the grantor’s lifetime while testamentary trusts are originated after death at the directive of the grantor’s will.
What Are the Benefits of An Irrevocable Trust for Estate Planning?Despite their rigidness, irrevocable trusts actually have significant benefits in terms of estate planning. Primarily, these types of trusts are used to avoid excessive taxation of an estate. Since the legal ownership of an irrevocable trust is transferred to the beneficiary at the time of its establishment, it cannot be considered part of the grantor’s taxable estate.
Irrevocable trusts are also beneficial to grantors who work in professions where they are likely to be sued. In the case of a lawsuit against a doctor, for instance, an irrevocable trust would protect a portion of his or her assets from liability.
How to Set Up an Irrevocable TrustIrrevocable trusts are less arduous to establish and maintain than revocable trusts, but you will still need the assistance of an experienced estate planning attorney. When you meet with an estate planning lawyer, he or she can help you determine which type of trust is best for you. You’ll also have the opportunity to discuss the desired terms of the trust.
The concepts of an irrevocable trust and estate planning may not be the most pleasant topics of conversation, but in many cases, they are necessary. Let the professional estate planning lawyers here at Ensberg Law Group help you navigate these delicate matters, so that you can move forward with the peace of mind that your assets are protected.