Estate planning is important for adults because it gives them the power to decide who is going to get which assets once the creator passes away. There are many components that people can utilize when they’re creating their estate plan. One of these is a trust.
Trusts are divided into two large categories – revocable and irrevocable. A revocable trust is one that can be changed, but that’s not the case with an irrevocable trust. In exchange for the inability to alter the trust, the creator can take advantage of specific benefits that aren’t present in a revocable trust.
What are the benefits of an irrevocable trust?
Once an irrevocable trust is established and funded, the assets are placed under the control of the trustee. The person who creates the trust doesn’t have control over the assets, so they can’t determine what happens once everything is set up. This provides the assets with protection from creditors. If the creator is sued and the other party wins, the assets in an irrevocable trust typically can’t be touched.
Another benefit is that assets in the irrevocable trust don’t count toward the value of the estate. This is beneficial for high-value estates because it may reduce the tax liability on the estate, which means beneficiaries will receive more of their inheritance.
The trust is only one part of the estate plan, so it’s critical to ensure that other parts, such as the will and end-of-life plans are established. Working with someone familiar with these matters is beneficial so they can ensure they get everything set up properly.
