There are many great options when it comes to protecting your assets and passing them down to your chosen beneficiaries. When you need the maximum protection for your assets, though, there is one clear choice: the irrevocable trust. While irrevocable trusts do come with some risk—they cannot be altered once they are set up—they provide the most secure combination of protection from creditors and tax benefits of any estate planning tool.
How Does an Irrevocable Trust Work?
An irrevocable trust is a type of arrangement that allows an individual to protect their assets. In this set-up, the grantor transfers a certain number of assets into a trust. These assets are then managed by a hand-picked individual known as a trustee, who is legally bound to manage the assets according to the grantor’s wishes. Upon the death of the grantor, the trustee is then responsible for ensuring that these assets reach their intended beneficiary. An irrevocable trust is unique in that its terms cannot be changed once it is set up. While many trusts are revocable, with irrevocable trusts, the grantor cedes control over their assets once the trust is set up in exchange for significant protections.
Advantages and Disadvantages of an Irrevocable Trust
With their stringent conditions, irrevocable trusts are not for everyone, but they do offer the highest level of asset protection of any legal arrangement. Irrevocable trusts remove taxable assets from the estate, so that they do not count toward the taxable value of the estate. Irrevocable trusts also protect a person’s assets from creditors. Since assets in the trust are no longer owned by the grantor, they are not subject to any legal action against the grantor. Irrevocable trusts are particularly useful for people with larger estates that may be subject to a high tax burden, and to people in professions such as medicine who may be vulnerable to lawsuits.
For all its benefits when it comes to wealth protection, the irrevocable trust does come with its downsides. The most notable is that it cannot be altered, so if you do not require the special protections that it offers, it may not be the best choice for you. It is also more complicated than other estate planning tools and can be more costly and time-consuming to set up.
Contact Deliberato Law Center
If you have any questions about irrevocable trusts or other aspects of estate planning, do not hesitate to contact the attorneys at the Deliberato Law Center. We have many years of experience helping our clients achieve the best estate planning results for themselves and their families. Give us a call at (216) 341-3413 or fill out the form below and start protecting your future today. Be sure to check out our Lawcast on our page and on YouTube.
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