Creating an estate plan involves determining the best way to get assets to your beneficiaries. This is sometimes done through the will, but you may decide that you want something a bit more structured and protective.
One option is an irrevocable trust, which is a legal tool to pass along assets. Once you create an irrevocable trust, it can’t be changed or cancelled unless you obtain permission from all beneficiaries or the jurisdictional court. There are specific benefits that are gained because of the permanency.
Protection from creditors
One of the main reasons people consider an irrevocable trust is to shield assets from creditors. Because the assets in this type of trust are no longer considered part of your personal estate, they’re typically protected from lawsuits, judgments or debt collection. This can be especially valuable if you’re a professional in high-liability fields or looking to safeguard wealth for future generations.
Privacy and efficiency
Unlike a will, which becomes public record when it enters probate, an irrevocable trust allows families to keep their affairs private. Trusts don’t go through probate, meaning beneficiaries can often access assets faster, with fewer court costs and less red tape.
Potential tax benefits
Depending on how it’s structured, an irrevocable trust can also offer tax advantages. Because the trust owns the assets—not you—those assets may be excluded from your taxable estate. In some cases, this reduces estate tax exposure. Certain types of irrevocable trusts can also be set up to generate income for beneficiaries while minimizing gift or income taxes.
An irrevocable trust is only one tool to consider when creating an estate plan. Taking the time to ensure your wishes are accurately reflected in a legally enforceable manner is beneficial.