An irrevocable trust is a property interest held by one or more person for the benefit of one or more person. It cannot be modified or terminated without the permission of the beneficiary or if designed properly, by the will of the trustee which will take effect at the trustee's death. The main advantage of this type of trust for an estate is it eliminates all incidents of ownership by removing the trust’s assets from the grantor’s taxable estate. Other benefits are:
- You can enjoy annual income tax savings.
- The benefits paid to your beneficiaries after your death are not subject to federal unless there is income or estate taxes.
- You can designate a charity to receive either income or a portion of the principal amount that is in the trust.
- Your assets can bypass the probate process upon your death and details about your holdings do not become a matter of public record.
- It helps keep assets intact and earns interest that builds up in the trust. You can also include a mechanism that guards against heirs squandering their inheritance.
- You do not have to give up the income your assets produce.
Advanced planning is a good approach to protecting your holdings. Being informed and having an attorney to represent you are crucial to proper arrangements for your long-term care needs. One important role of an irrevocable trust is protection in the case of a serious illness such as Alzheimer’s. Placing everything into it can help minimize loss of control because the trustee is typically an independent person chosen by the Grantor. He or she manages the assets in the trust and is bound by its provisions.
For more information or if you have any questions about irrevocable trusts please contact Chandler & Knowles CPAs today.