Creating an estate plan should be a priority for every adult. Doing this comes with several decisions, including the best way to pass assets down to beneficiaries. While it’s suitable to do this through wills in some instances, there’s another option to consider – trusts.
Some trusts are classified as irrevocable. This means that they can’t be changed once they’re established and funded. The law sets two exceptions to that rule. One of these is that the court rules the trust can be changed. The other is that the beneficiaries all agree to the changes.
Benefits of an irrevocable trust
While some people might be put off by the permanency of an irrevocable trust, there are specific benefits to consider. Once the trust is established, the assets are managed by the trustee.
Because the creator relinquishes their control over the trust’s assets, the assets are shielded from creditors. If the creator has debts or is successfully sued, the assets can’t be claimed to satisfy the amount owed.
Another benefit of the irrevocable trust is that the assets are removed from the estate. This can help to reduce the value of the estate, which can reduce the taxes the estate owes. This is particularly helpful for individuals who have high-value estates.
Irrevocable trusts bypass the probate process, so beneficiaries can receive the assets faster. This also gives them privacy because trusts aren’t part of the public court record.
Trusts are only one component that can be included in an estate plan. Considering the other components, including the will and powers of attorney designations, can help creators to establish a comprehensive estate plan.