One of the primary goals of an estate plan is ensuring that your beneficiaries receive the assets you want them to have. While some people opt to do this through their will, establishing and funding a trust is often another viable option.
Some trusts are classified as irrevocable. This means that once the creator establishes and funds the trust, they can’t change the terms. The only exceptions to this are if they can obtain the consent of each beneficiary named in the trust or if they get permission from the court.
Transfer of control
An irrevocable trust involves transferring control of the assets to a trustee who isn’t the creator. Many of the benefits of this type of trust are present only because the creator doesn’t have the ability to control the assets.
Benefits of an irrevocable trust
When an irrevocable trust is funded, the assets placed in it aren’t considered part of the estate anymore. This reduces the overall value of the estate, which can help to reduce the estate’s tax burden, particularly in higher asset estates.
Another benefit of an irrevocable trust is that the assets can’t be seized by the creator’s creditors. This is particularly helpful for people who have jobs that have higher risks of lawsuits and those who have considerable debts.
Once the creator of the trust passes away, beneficiaries can typically receive their inheritance faster than what’s possible if they have to wait on a will to go through probate. The trust will also provide more privacy since the terms won’t be entered into public record through the probate court.
Setting up the trust and ensuring it’s funded properly are critical for individuals who opt to use this method for passing assets to their beneficiaries.