Creating an estate plan means thinking about what you want to happen with all the assets you own. Some people opt to set this plan up via a will, but that’s not always the most appropriate option. Using a trust is another option that has several benefits worth considering.
When you’re considering a trust, you’ll come across the terms “revocable” and “irrevocable.” These terms have to do with how a trust can be altered once it’s created. A revocable trust can be changed as you see fit, but these trusts have fewer benefits. An irrevocable trust can’t be changed unless you have the permission of the court or all the beneficiaries, but that’s what makes some of the benefits of this type of trust possible.
What are the benefits of irrevocable trusts?
Some people are wary about setting up an irrevocable trust when they realize that they can’t change it, but they soon recognize that the benefits may outweigh their inability to alter the trust. When an irrevocable trust is set up and funded, control of the trust transitions to the trustee, which is what sets up protection of assets from creditor claims.
The contents of an irrevocable trust typically can’t be claimed by creditors or seized if you’re sued. This is what often makes an irrevocable trust attractive to individuals who have careers that come with a high risk of being sued.
An irrevocable trust can also reduce the taxable value of your estate, which is important if you have a high-value estate. Additionally, the assets in the trust will bypass the probate process when you die. This means the terms of your beneficiaries’ inheritance won’t become part of the public record, so they will have increased privacy.
Setting up an irrevocable trust is only one part of a comprehensive estate plan. Ensuring you have everything set up so the plan reflects your wishes is critical, and seeking legal guidance accordingly can help.
