The Irrevocable Trust: A Powerful Estate Planning Tool
Properly prepared, an irrevocable trust is a powerful estate planning tool that confers a number of benefits.
Irrevocable Trusts Explained
To understand the meaning and purpose of an irrevocable trust, you have to understand what a “trust” is in the first place. For many people, it is a tricky concept to grasp because a trust is not something you can hold or touch. It works for some people to picture the trust as a big box. The person who makes the trust (the “grantor”) puts property into the name of the trust (the box) for the benefit of someone else (the “beneficiaries”). The grantor also appoints someone (called a “trustee”) to oversee the trust and ensure the terms of the trust and its instructions are followed.
This is where revocable and irrevocable trusts differ. In a revocable trust, the grantor is almost always the trustee – and he or she can also be a beneficiary. As the grantor and the original creator of the trust, he or she can change the trust or dissolve it completely at any time. This is what makes a trust revocable. By contrast, in an irrevocable trust, the grantor cannot serve as the trustee. Furthermore, the irrevocable trust can only be changed or dissolved if the trust gives the trustee the authority to do so – and certain types of irrevocable trusts can’t be modified without court intervention.
For practical purposes, it is best to think of your irrevocable trust as just that: irrevocable. This is why it is critical to thoroughly discuss your estate plan with a knowledgeable attorney who can identify your goals and create detailed trust documents that achieve them.
Why Use an Irrevocable Trust?
Irrevocable trusts are useful in a variety of asset management strategies. They can safeguard assets from creditors, establish an income stream for spouses, children, and family members with special needs, and reduce your estate income tax obligation. Some grantors set up trusts to provide for the needs of adult children or other family members who can’t handle money responsibly. There are many reasons why an irrevocable trust is a good idea for your estate plan. With comprehensive legal guidance, you can identify which type of trust works best for your unique situation.
Creating an Irrevocable Trust
In the realm of irrevocable trusts, picking up a do-it-yourself trust kit at the local office supply store is a very bad idea. Because irrevocable trusts are more rigid than their revocable counterparts, it is essential to work with an experienced estate planning and trust attorney to ensure yours is properly prepared.
The first step is creating a trust agreement that names a trustee and identifies beneficiaries. This trust agreement contains detailed instructions regarding distributions, contingencies, and other important provisions. The grantor must then “fund” the trust by placing assets into the name of the trust itself.
Contact My Office for More Information
To learn more about irrevocable trusts and how one might work for you, call my office today at (772) 220-9699 to discuss your estate planning goals.