Creating an estate plan is one of the most important things people can do once they reach adulthood. While many people focus on their will, there’s another option they should consider for passing down assets.
Some people opt to establish and fund a trust to get assets to their beneficiaries. One category of trusts to consider is the irrevocable trust, which is a trust that can’t be changed without the permission of all beneficiaries or the court. In exchange for the inability to change the trust, these trusts have several benefits.
Reduction in estate value
Assets that are placed in the irrevocable trust are removed from the estate, which reduces the overall size of the estate. This is important for higher value estates because reducing the value could reduce the tax liability.
Protection from decedent’s creditors
Once assets are placed in the irrevocable trust, they’re put under the control of a trustee. The trust’s creator doesn’t have any control over those assets. This offers protection against the creator’s creditors. The assets in the trust can’t be claimed by those creditors, so they’ll be passed down to the beneficiaries.
Privacy and ease
Trusts bypass the probate process, which means the terms won’t be disclosed to the public unless the beneficiaries make them public. Since the trust doesn’t go through probate, beneficiaries can receive their inheritance in an efficient manner.
A trust is only one component in a comprehensive estate plan. Ensuring that everything in the estate plan is set up properly is critical, so it’s important to have professional estate planning guidance.