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Should you consider having an irrevocable trust?

On Behalf of | Sep 30, 2021 | Estate Planning |

Is it ever a good idea to give up substantial control of your assets to another person or entity? Well, it all depends on your reasons, and sometimes, it may be the best thing to do — in the interests of your estate. An irrevocable trust legally removes your rights of ownership to assets you grant to the trust.

Advantages of having an irrevocable trust

Having an irrevocable trust can be beneficial in some ways, as detailed below. However, it is important to proceed carefully since changing the terms of an irrevocable trust Is not so straightforward.

  • It could mean fewer estate taxes. It may be a smart financial move to reduce your estate’s tax liability by putting your assets in an irrevocable trust. Such property is not considered part of your estate when it comes to paying taxes.
  • An irrevocable trust could protect your estate. Spendthrift trusts and special needs trusts serve to ensure that your beneficiaries’ financial future is secure by having a third party take charge of the assets. In addition, creditors cannot go after property under an irrevocable trust.
  • Protection from lawsuits and court judgments. A mere court order cannot override an irrevocable trust and remove assets.

Disadvantages of an irrevocable trust

There are some downsides, too, in having your assets under an irrevocable trust. Losing control over your assets is probably the most significant cause for concern. You cannot reclaim surrendered assets or manage them in any way.

On top of that, you are at the mercy of the structure of the trust. It means that you are bound to the confines of the trust and cannot easily change the terms after surrendering your assets.

Therefore, an irrevocable trust requires careful planning and evaluation. Since such a decision can have long-term ramifications, it is important to learn more about the aspects of succession law that will come into play when thinking of the plans to put in place.