People who are creating an estate plan have to review the options they have for getting their assets to the intended beneficiaries. This is sometimes done through the will, especially if the estate is small and there’s not much of a chance of a will contest.
Another option for some people is to establish a trust. Anyone who’s looking at their options for trusts will notice that these are either revocable or irrevocable. The primary difference is that it’s possible to change a revocable trust, but it’s not possible to change an irrevocable trust unless the court or the beneficiaries agree.
What are the benefits of an irrevocable trust?
While it may seem that irrevocable trusts aren’t a very desirable option since they can’t be changed, they come with very important benefits to consider before bypassing this option. The assets in the irrevocable trust transfer to the control of the trustee once the trust is established and funded. This opens the door for several benefits.
One of the most important benefits of an irrevocable trust is that the assets are protected from creditor claims. If the creator has credit accounts that aren’t paid or if they have judgments against them, the assets in the trust can’t be claimed to satisfy those. This enables the creator to pass down the entire contents of the trust as intended.
These trusts can also reduce the size of the estate, which can reduce the tax burden for larger estates. Additionally, trusts make it easier and more private for beneficiaries to get their inheritance because these trusts bypass the public probate process. Anyone who’s considering this option should work with someone familiar with these trusts so they can determine if this is a suitable option for their estate.