There are many options people have when estate planning – one such option is a trust.
But, what is a trust? A trust is a legal document (much like a will) that allows someone to set aside assets for a beneficiary, reducing distribution time, paperwork and estate taxes. Trusts can also include specific details that limit how much or when someone can take from a trust.
There are several types of trusts: living, funded, unfunded and revocable. Some people, when making a trust, will consider creating an irrevocable trust. There are several benefits to irrevocable trusts – here’s what you should know:
You can reduce estate taxes with an irrevocable trust
People who own large estates may consider an irrevocable trust to reduce their estate tax obligations. This is often done by putting a large amount of your estate aside for a beneficiary, essentially taking assets out of your name, thus removing taxable estate from your name. Putting aside assets for a beneficiary may also reduce estate taxes after your death.
Some people may even set up an irrevocable trust with the intent of donating a large sum of assets to a charity after they pass away. A charitable trust could be set up to donate money for a set number of years.
Irrevocable trusts can protect against lawsuits
Another benefit of irrevocable trusts is the protection it provides to assets – especially assets that you want guaranteed to be inherited by a family member or loved one.
If a creditor tries to liquidate assets, then your irrevocable trust will prevent anyone from accessing your assets. This can be greatly beneficial for anyone in a profession that may face several lawsuits against their name.
Irrevocable trusts are difficult to change once they’re created. That’s why many people looking to manage their estate seek legal help who can ensure they’re doing everything right.