Estate plans are the most effective way to pass down assets to your loved ones when you die. These plans have several different components that work together to make your wishes known and enforceable.
One of the tools that you might use when you’re setting up your estate plan is a trust. There are many different types of trusts, but they’re all classified as either revocable or irrevocable. A revocable trust is controlled by the creator and can be canceled or modified when the creator feels it’s necessary. An irrevocable trust is much different.
What is an irrevocable trust?
An irrevocable trust is one that can’t be modified or voided unless the beneficiaries agree. The only exception to this is if there is a court order to change or dissolve the trust. The assets in an irrevocable trust are titled in the trust’s name once it’s funded.
Some individuals set up an irrevocable trust because they want to reap the benefits of it. Since the trust’s assets aren’t in the name of the creator, they don’t count toward the value of the estate. This can provide tax breaks.
Another benefit to irrevocable trusts is that the assets in the trust can’t be claimed by the creator’s creditors. This makes an irrevocable trust a good tool for people who are in professions that come with a high risk of being sued.
Getting your estate plan together is crucial for all adults, but you shouldn’t ever rely on how someone else handled their plan. Working with someone who knows your situation and wishes may help you to learn about the options you have for your estate plan.