There are two main types of trusts: revocable and irrevocable. Basically, each trust is self-explanatory on the surface. For the most part, you have unfettered ability to revoke or amend a revocable trust. In contrast, it is extremely difficult and sometimes impossible to revoke or even amend an irrevocable trust. On the surface, it appears – and is true – that a revocable trust provides the creator of such trust with greater flexibility in modifying that trust to meet their comprehensive estate planning goals. However, irrevocable trusts still play an important role in estate planning and it is important to understand their benefits to make an informed choice about the type of trust that might be right for you.
While most trusts will avoid probate, irrevocable trusts established during your lifetime will definitely be able to avoid probate. This will ultimately save you and your loved ones time and money by allowing a trust to take effect immediately as it has been designed to do. Your loved ones will be able to access an irrevocable trust according to its structure without having to wait for the courts to approve a Will or other documents related to probate of the deceased person’s estate.
Lowers Value of Your Overall Estate
You may think that lowering the value of an estate is hardly a benefit. However, once you transfer property into an irrevocable trust, it is subtracted from the value of your estate. Depending on exactly how the irrevocable trust is structured and what its purpose is, you may still be able to retain use of such property – but it will not be counted in the overall value of your estate. That means you might be able to use irrevocable trusts to avoid some serious unintended consequences related to federal and state estate taxes because the property technically belongs to the trust and not to you.
Long-Term Planning and Security
An experienced estate planning attorney can help you establish an irrevocable trust that meets the goals of your estate planning approach. Irrevocable trusts can be used to help establish long-term financial security for your heirs, which may be valuable in leaving assets to minors or individuals that may not be financially responsible. By establishing an irrevocable trust for these purposes, you can determine the age and distribution amounts each individual beneficiary will be eligible to receive and avoid concerns over someone squandering their inheritance. Irrevocable trusts can avoid the pitfalls that come with revocable trusts that can be revoked or amended based on current circumstances and, in this way, offer greater protection for your assets and your heirs as well as long-term viability.
Protection Against Creditors
The rigid structure of an irrevocable trust makes them exceptional vehicles for protecting assets from creditors, both from your own creditors and those of your heirs. Such rigidity also helps protect your heirs in case of your divorce or even in case of theirs down the line. The rigid qualities of these trusts certainly have their advantages, but they are not for everyone. An experienced estate planning attorney can help you review your estate planning goals and determine which type of trust – if any – is right for you.