A will, no doubt, is the most common estate planning document. If you talk about creating an estate plan in a gathering, the next thing that enters people’s mind is a will. In fact, some people actually believe that estate planning is all about drafting a will. People aren’t even aware of what a will is, not to talk of a trust or the types of trust.
You see, a good estate plan is one that consists of the important estate planning document which includes a trust, a will, power of attorney, letter of intent, health care power of attorney, etc. Your estate plan is not fully complete without one of the listed documents. Let’s take a look at what an irrevocable trust is.
There are two types of trust, a revocable trust and irrevocable trust. An irrevocable trust is a type of trust where its terms cannot be altered, modified, changed, or terminated without the consent of the beneficiaries designated by the grantor. The grantor or trust owner, having effectively moved all ownership of assets into the trust, legally eliminates all of their authority of ownership to the assets including the trust.
An irrevocable trust is the opposite of a revocable trust, which allows the trust owner to alter, modify, or terminate the terms of the trust without contacting the beneficiaries of the trust.
How does this Trust Works?
Having known what an irrevocable trust is, I bet the next question on your mind is “How does an irrevocable trust works? You see, knowing how an irrevocable trust work may help you understand its numerous benefits. Also, as an estate owner it is important that you have a basic understanding of how one of the most important estate planning documents works.
The primary reasons for creating or setting up an irrevocable trust are for estate and tax. The advantages of this type of trust for estate assets is that it takes out all the incidents of ownership, effectively taking out the trust’s assets from the grantor’s taxable estate. In addition, it also. Ensure that the grantor is not liable for any tax on the income generated by the assets. Of course, the tax rules are different in different jurisdictions. However, in most situations, the grantor cannot obtain these benefits if they are the trustee of the trust. Assets included in the trust are:
- Business investment assets
- Life insurance policies. Etc.
Creating a trust is not a walk in the park. Regardless of the type of trust you wish you create, you’ll have to put in the money, effort, and time to ensure that everything goes as planned. To make matters easier for you, it is important that you hire an estate planning attorney or a trust lawyer.
Trusts are often regarded as a vehicle for the rich, and since the cost of setting up a trust is high, such statement may be true. But, trust have an important role to play in estate and legacy planning for people of more modest means.
Irrevocable trusts are beneficial to those who work in professional that make them prone to lawsuits, like doctors, lawyers etc. As soon as an asset is moved to such trust, it becomes a property of the trust for the benefit of the designated beneficiaries. Thus, it is very safe from lawsuits and creditors, as the trust will not be included to any lawsuit since it isn’t owned by the individual subjected to the lawsuit.
The irrevocable trust of the modern world comes with a lot of provisions that were not present in the older types of trusts. These provisions or extras makes the trust more flexible especially in the area of trust management and the sharing of assets.
Provisions like decanting, which allows a trust to be transferred into a newly set up trust that has a more conventional provisions, can make sure that the assets in the trust will be properly managed now and later on.
What is the Average Cost of an Irrevocable Trust?
Irrevocable trust can be an effective tool for safeguarding your assets if you want to qualify for Medicaid, and for reducing probate after your demise. In addition, irrevocable trust can also be a good tools for lawyers to rip off clients. A trust shouldn’t cost more than $2,500-$3,000.
Ensure you hire a competent trusts attorney in Buffalo NY to assist you in the process of creating your trust.