If you have started the estate planning process in California, you’ll come across many elements that will help you transfer assets to heirs after your passing. One of those elements is an irrevocable trust, but are these instruments suitable for you?
What is an irrevocable trust?
Several different types of trusts exist for estate planning, but irrevocable trusts are one of the two main types, the other being a revocable or living trust. You cannot change an irrevocable trust once you have created it, except wonder specific circumstances where all the beneficiaries agree or through a court decree. When creating a trust of this type, you transfer assets into it, give up ownership rights, and cede control to the trustee. These assets are then removed from your taxable estate.
Benefits of irrevocable trusts
Individuals with large estates generally use irrevocable trusts to protect their heirs from burdensome estate taxes. Within this category, you can choose several different strategies, such as credit shelters trusts that allow you to leave money to your spouse or heirs with triggering estate taxes. Irrevocable trusts also protect you from possible future creditors or individuals who want to sue you and can also help you qualify for specific government programs in the future.
Should I include an irrevocable trust?
Anyone considering an irrevocable trust as part of their estate plan should take a thorough look at their situation with a financial advisor. Remember that these financial instruments are almost impossible to change.
Irrevocable trusts are often only one part of a viable estate plan. When planning or modifying your estate, you should consider the breadth of your needs as you age to provide yourself with sufficient income. Consider other strategies that you can change and update to provide you peace of mind.