One of the primary purposes of an estate plan is to provide instructions for your loved ones so they know what to do with your assets when you pass away. You can use your will to do this, but that leaves a chance that the will might be contested.
The other option you have for handing down assets is a trust. Irrevocable trusts are one type of trust that you might encounter as you’re trying to determine what trust meets your needs.
What is an irrevocable trust?
An irrevocable trust is a legal tool that holds assets until you pass away. Once you pass away, the trustee distributes the assets according to the terms you included when you set up the trust. The trustee is also responsible for caring for the assets in the trust while you’re still living.
One of the key points of an irrevocable trust is that it can’t be altered once you set it up. There is an exception if you can obtain the permission of all beneficiaries or from the court.
The permanency of the irrevocable trust comes with benefits that aren’t present with other trusts. One of these is that your creditors can’t stake a claim to the assets in the trust. This protects the assets so your loved ones can reap the benefits.
Irrevocable trusts also remove the included assets from your estate. This is beneficial for people who have larger estates because it reduces the value, which may save the estate money on taxes.
Trusts all bypass the probate process, so they provide privacy for the beneficiaries. Working with someone who can assist with setting up the trust and getting the estate plan together is beneficial.
