All adults should take the time to create an estate plan. This requires them to make multiple decisions, some of which revolve around their property. While estate planning includes deciding who receives what, it also can help people protect assets, reduce taxes and help ensure that their plans are carried out as intended.
If you’re in the process of creating an estate plan, you may realize that you can distribute assets through your will, but there’s also another option — trusts. When you start looking into trusts, you’ll see that they are either revocable or irrevocable.
A revocable trust is one that you can change when you want. It’s not a permanent trust, but it doesn’t have the benefits of an irrevocable trust. An irrevocable trust is a permanent trust that can’t be changed unless you can get permission from the named beneficiaries or the court.
Benefits and limitations of an irrevocable trust
While some people don’t like the permanency of an irrevocable trust, it has some potentially important benefits. Once you establish and fund the irrevocable trust, all the contents are controlled by the trustee. Because you don’t have control over the assets, those assets are protected from your creditors. They are also removed from your estate, which can mean a lower tax bill.
Beneficiaries of irrevocable trusts often appreciate being able to bypass probate. This allows them to receive their inheritance faster and gives them privacy, since trusts don’t become part of the public record. If you want to use an irrevocable trust as part of your estate plan, it’s important to have experienced estate planning guidance. This can help ensure that everything is set up according to your wishes and the law.