Creating an estate plan is one of the most important things adults can do to help provide for their loved ones. If you’re setting up an estate plan, it’s critical that you fully understand the options you have available to pass your assets to your beneficiaries.
For example, you may choose to integrate an irrevocable trust into your estate planning strategy. When you set up this type of trust and fund it, you can’t change the terms or cancel the trust unless you have permission from the beneficiaries or court. The assets placed within the trust are controlled by a trustee.
What are the benefits of an irrevocable trust?
An irrevocable trust bypasses probate court, and the assets that you place in the trust should be distributed according to the instructions you provide. Because the trust doesn’t go through the court, beneficiaries will have more privacy than they would if the assets were passed to them via a will.
Once you fund an irrevocable trust, the affected assets aren’t part of your estate any longer. This reduces the value of your estate, which is helpful if your estate will otherwise owe any taxes. Tax benefits can be considerable, but the laws surrounding this concern are complex so it’s best to seek guidance if this is one of your goals.
Another benefit of an irrevocable trust is protection from creditors. Since you don’t control the assets in the irrevocable trust, they can’t be claimed to satisfy debts or court judgements. This can be particularly beneficial if you work within a profession in ways that place you at a high risk of being sued.
An irrevocable trust is only one option that you may use when crafting your estate plan. You also need to get other parts of your estate plan, including a will and powers of attorney, set up. Working with a legal professional who can assist with getting everything together can help to ensure it’s done properly in a way that clearly conveys your wishes.
