Irrevocable trusts are a crucial part of any estate plan focused on protecting and preserving assets for future generations.
Irrevocable trusts do not need to be funded with millions of dollars to be effective. Depending on the circumstances, irrevocable trusts can offer real benefits at much lower levels. Almost everyone who engages in some form of estate planning will have an irrevocable trust as part of the plan.
While irrevocable trusts have been and still are used to save estate taxes and state income taxes, as exemption levels rise, these trusts are being used more and more for non-tax reasons.
Irrevocable trusts are an excellent tool for making gifts with strings attached. As settlor of the trust, you set the rules for how the trust assets are managed and when distributions can be made.
Did you know that you can make a gift to a child and protect that gift from the child’s creditors? An irrevocable trust is the tool that makes this possible.
An irrevocable trust is a contractual property arrangement whereby the trust’s settlor (creator) drafts a written set of instructions that control how the property is to be managed. The person entrusted with managing the trust is the trustee. The beneficiaries are those who receive distributions.
The amount of control you retain varies depending on the trust’s purpose. Generally, the less control you have over the trust, the better that trust functions from an asset protection standpoint. Limiting your control makes it harder for your creditors to go after it. However, maybe you want to control investment decisions, the management of a closely held business, distributions to a minor or spendthrift, etc. All of these decisions will affect the operation of the trust.
Sean Patrick Flanery
There are long-term, multi-generational dynasty trusts; shorter-term age distribution trusts; lifetime trusts; gift trusts; Medicaid trusts and supplemental benefits trusts; life insurance trusts; trusts that operate a business or manage a portfolio of intellectual property; grantor trusts and non-grantor trusts; spousal access trusts; charitable trusts
…to name a few
First step is to talk to an attorney to better understand your goals and objectives.
If an irrevocable trust is right for you, give a lot of thought to your situation and your reasons for creating the trust.
Keep the process moving and review your plan periodically.
There are many reasons to retain a level of control.