If you have been mulling over the options for estate planning, you’ve definitely come across the phrase “irrevocable trust” more than a few times. It is one of the many options you have available to you to protect your assets for your heirs but it can be one of the most complicated processes to get started. At Safe Harbor Wills & Trusts in Watertown and Syracuse, we have many years of experience helping people plan for their retirement, as well as counseling people about what to do in case of an elder care emergency. Read on to learn about irrevocable trusts. At the end of the blog, hopefully you will have a better idea of what they are and if one of these trusts might be a good idea for your family.
What is a Trust?
In the most simple terms, a trust is a way for one person (the trustmaker or trustor) to transfer ownership of money or other assets to a fund which is legally separate from the person who funded it. The trust is then administered by a trustee who manages the assets and, if spelled out in the trust agreement, distributes them to any named beneficiaries. For legal and tax purposes, the trust is a separate entity from the person funding it and becomes the rightful owner of all the assets and property that are used to fund it. This helps keep these assets out of the hands of creditors and the government and allows the beneficiaries to use them later. A trust also helps the person who founded the trust by lowering the value of their estate, which is important when it comes time to pay estate taxes.
Revocable vs. Irrevocable Trusts
As the names imply, a revocable trust is one that can be changed or dissolved whenever the trustor wants. A revocable trust is usually set up and administered by the trustor who is usually the primary beneficiary, at least until he or she passes away or becomes incompetent. Because the property used to fund a revocable trust can be removed from the trust at any time, it is still treated as if it were an individual’s property and taxed as such. Any trust can help your beneficiaries avoid the probate process as long as all of your assets are included in the trust. Make sure to work closely with your attorney to ensure that everything you own ends up under the care of your trust, whether revocable or irrevocable.
An irrevocable trust has many more tax advantages than the revocable trust. Because the property ceases to belong to the trustor, that person enjoys the tax benefits of a smaller estate. These trusts, much like revocable trusts, can have provisions for dealing with mental disability built into them, so that your assets are protected if you should become legally unable to administer your trust at some point.
Contact us at Safe Harbor Wills & Trusts today to find out how we can help you plan, create, and administer a trust that will protect your assets. Our experience and dedication to helping people protect their assets will allow you to rest easy knowing that your future, and the future of your beneficiaries, is taken care of.