Creating your estate plan is a way that you can let your loved ones know what you want to do with your assets after you pass away. These plans can have many components, including the will and trusts, both of which can stipulate who receives which assets. While it’s possible for some people to use only a will, there are specific benefits to using trusts.
If you’re in the midst of creating your estate plan and want to use a trust, you will encounter the terms revocable and irrevocable. A revocable trust can be changed, but it doesn’t provide all the benefits of an irrevocable trust. In exchange for the benefits of an irrevocable trust, you will give up control of the trust and the ability to change it. The trust is managed by a trustee and can only be changed if the court or the beneficiaries approve the changes.
What are the benefits of an irrevocable trust?
One of the primary benefits of an irrevocable trust is that the assets contained in the trust are removed from the estate once the trust is funded. This can reduce the value of the estate, which may help to reduce the tax liability.
Another benefit is protection from your creditors. Because you don’t have control over the trust, creditors can’t claim the assets in it to satisfy debts. This can be important if you have a job or business with a high risk of being sued.
Establishing a trust as part of your estate plan can be beneficial to your beneficiaries because the contents of the trust don’t have to pass through probate. This provides them with some privacy since the terms aren’t part of a public court record. It can also get their inheritance to them in an efficient manner.
Working with someone familiar with irrevocable trusts can be beneficial. This individual can help you to get everything set up and ensure that the terms of the trust are legally enforceable.