What is an Irrevocable Trust?
An irrevocable trust is a trust which cannot be altered without the involvement and consent of the beneficiary, in contrast with a revocable trust, which can be changed by the grantor. There are some definite advantages to setting up an irrevocable trust, but there are also some very serious disadvantages which people should consider before establishing such a trust. It is also important to use the services of a skilled legal professional when writing up the documents which pertain to the trust, to ensure that it is established appropriately.
When a grantor creates an irrevocable trust, he or she gives up control of the assets in the trust. This creates a totally separate tax entity, because the trust is not controlled by the grantor, and it is not yet controlled by the beneficiaries, either. The trust pays its own taxes, and it is usually administered by a trustee.
Giving up one's assets might not seem to have any particular advantages at first glance. However, one of the convenient things about an irrevocable trust is that it allows people to avoid probate and many of the associated taxes and fees, because the grantor has given the property away before death. He or she can make contributions to the trust over the course of time, ensuring that beneficiaries will be able to access the trust immediately upon death, rather than having to wait through probate, and that beneficiaries will avoid many of the estate taxes and fees.
People can also use irrevocable trusts to protect their assets. Because the assets are not owned or controlled by the grantor anymore, the grantor's creditors have no right to access the funds and other assets in the trust. This technique can be utilized by someone who wants to make sure that his or her estate ends up in the hands of family members and other beneficiaries, rather than with creditors who would be able to take a slice of the estate during conventional probate proceedings. Reducing one's assets also tends to lower taxes, which can be a side benefit in some cases.
Irrevocable trusts may be utilized to create endowments to charitable organizations and other causes, as well. Someone who wants to create a trust which will go to his or her alma mater, for example, might opt to make an irrevocable trust for this purpose. Some life insurance companies also provide benefits in the form of irrevocable trusts.
When establishing an irrevocable trust, grantors should think carefully. Once the paperwork is signed, it cannot be unsigned, and the grantor will have lost control of his or her assets forever.
our primary home is in an irrevocable trust. Can we borrow from it to make much needed repairs to a seasonal home. which will eventually be our primary home?
You should talk to Estate Street Partners based out of Boston, MA when it comes to irrevocable trust planning. They are truly experts in this area. They have a product called the Ultra Trust which is essentially a solid irrevocable trust.
There are many nuances to trust planning and the minor details to financial planning that goes along with it. These guys know their stuff. This is their forte and expertise.
Anon86724- I wish I could answer that question. I know that irrevocable trusts can not be changed, so it is probably best to seek out legal advice from an estate attorney.
The main difference between a revocable and irrevocable trust is that a revocable trust can be amended, while an irrevocable living trust can not.
I have an irrevocable trust fund established and at the time I did not know what that meant. Is there anything I can do to get it reduced or reversed?
Post your comments