Creating an estate plan is a way that you can let your loved ones know your wishes about how various concerns should be handled after you die, including your finances and assets. Some people opt to outline their plan for assets in a will, and others choose to use a trust.
If you choose to use a trust to pass assets to your beneficiaries, you’ll need to choose between two specific structures. All trusts are classified as either revocable or irrevocable. The primary difference between them is that you can change the terms of a revocable trust, but you can’t alter an irrevocable trust unless you have approval from either the beneficiaries or the court.
Why should you consider an irrevocable trust?
Some people bypass irrevocable trusts because they want to be able to change the terms after they create it; however, there are some significant benefits that come with using an irrevocable trust. These benefits may balance out the fact that these trusts aren’t easy to change.
When you create and fund an irrevocable trust, you don’t have control over the assets. Instead, the trustee of the trust has control of them. Because of this, the contents of the trust can’t be claimed by your creditors. This makes the irrevocable trust a viable option for people who are in professions that come with a high chance of being sued.
The assets that you place in an irrevocable trust aren’t considered part of your estate for valuation and tax purposes. If you have a high-value estate, this could help to save considerable money in taxes. Another benefit to this approach is that these trusts may preserve access to needs-based programs.
An irrevocable trust is only one legal tool that you have at your disposal to pass along assets to your beneficiaries after you die. If this is an option you choose, it’s critical to ensure that it’s set up properly, so seeking the assistance of a legal representative is generally a good idea. You should also get the rest of your estate plan set up so your loved ones have a comprehensive set of instructions to follow related to all relevant concerns.
