Setting your estate plan up so that it accurately reflects your wishes is critical. Many people don’t realize that you don’t have to be wealthy to need an estate plan. Ideally, all adults will have a plan in place.
Trusts are one of the options that you have for passing your assets to your loved ones. Trusts are categorized as either revocable or irrevocable. You control the assets in a revocable trust, but a trustee manages the ones in an irrevocable trust. There are specific benefits that come when you relinquish control in an irrevocable trust.
Reduction in estate value
When you fund an irrevocable trust, you can’t change the terms of the trust without the permission of the court or all the beneficiaries. Because you can’t change the trust, those assets don’t count as part of your estate any longer. This reduction could mean that your beneficiaries can pay less in estate taxes than they would have to pay if you didn’t have the irrevocable trust.
Protection from claims against you
The assets in an irrevocable trust can’t be touched by your creditors or if you have a judgment against you. This benefit enables you to pass down as much as possible to your loved ones. An irrevocable trust is often a viable option for a person who has a high-risk occupation since the assets can’t be claimed.
Remember, the trust is only one part of your estate plan. You also need to get the will, power of attorney designations and any other vital components of your estate plan set so you can have peace of mind knowing that you’ve done what you can to care for your loved ones after you pass away.