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What is an irrevocable trust?

On Behalf of | Jun 21, 2024 | Estate Planning

Creating an estate plan requires you to think carefully about how you’ll pass your assets down to your beneficiaries. If you only have simple assets, you may be able to pass everything down in your will. If you have more complex or valuable assets, you may need to use a trust to get the assets to your beneficiaries. 

One type of trust that you might encounter is an irrevocable trust. This is a trust that can’t be changed once it’s established and funded. The assets within the trust are controlled by the trustee. In exchange for relinquishing control, you and your beneficiaries will have specific benefits. 

Protection from your creditors

Since you relinquish control of the assets to the trustee, the assets are protected from your creditors. This means that if there’s a legal judgment against you or creditors come to collect from you, they can’t touch the assets that are in the trust. An irrevocable trust might be valuable if you have a high-risk profession. 

Tax benefits

Assets that are placed in the irrevocable trust aren’t part of your estate any longer. This can provide you with tax benefits because the value of the estate is lower without those assets. Your beneficiaries won’t have to deal with their inheritance being much lower than expected because you planned ahead.  

Irrevocable trusts bypass the probate process, which provides your beneficiaries with privacy. This can also get the inheritance to your loved ones faster than if they had to go through the probate process. Because these trusts have to be set up properly, it’s critical to work with someone familiar with these matters.