Developing an appropriate estate plan to preserve and protect assets is a concern for many people. Individuals with a high net worth in particular may be concerned with finding the best way to protect their assets now so they may be assured that the inheritance is available for their children. One estate planning option to consider is an irrevocable trust. There are several advantages to this type of trust, although it may not be appealing to everyone.
Irrevocable Trust vs. Revocable Trust
A trust is a fiduciary arrangement in which a person, or grantor, gives authority to a trustee to hold the title to the grantor’s assets for the benefit of a third-party beneficiary. The difference between an irrevocable and revocable trust lies in the ability of the grantor to make changes to the trust once it has been established.
A revocable trust allows the grantor to make changes to or terminate the trust, and thus retain control of their assets, as long as they are still alive and competent. By contrast, an irrevocable trust typically cannot be changed or terminated without the consent of the beneficiary.
Why Would Someone Choose an Irrevocable Trust?
This type of trust offers solid asset protection for the beneficiary. The money placed in the trust may be specified for use, such as education or a wedding, and is actually removed from the grantor’s estate while they are living. They can provide a number of benefits including:
- Assets are protected from judgments or creditors
- Taxable assets are removed from the estate, allowing for estate tax exemptions for the grantor
- Assets may be gifted to children with less tax implications
There is an obvious drawback of losing control over assets that would make this option unappealing to some people. However, for some, an irrevocable trust may be a sound financial decision. Due to the intricacies of this type of trust, working with an attorney who is well-versed in estate law is highly suggested. Churchill, Quinn, Richtman & Hamilton, Ltd attorneys have extensive experience protecting and preserving our clients’ wealth to pass on to future generations and specialize in determining which estate planning options are best-suited to each individual. Contact us at 847-223-1500 to learn more.