As life changes and your estate planning goals evolve, you may find yourself considering the use of an estate plan with an irrevocable trust. These trusts are not right for everyone, however. Since the trusts are irrevocable, they cannot be modified or rescinded if you later change your mind. Irrevocable trusts are also different from living trusts because they are treated as their own entity for tax and creditor purposes. Following is an overview of two of the most common reasons for updating your estate plan to utilize an irrevocable trust.
One common reason that people opt to use irrevocable trusts is to reduce taxes. These taxes may include estate taxes, generation-skipping transfer taxes, and income taxes. Many different types of irrevocable trusts can help to accomplish this goal including:
- Bypass Trusts
- QTIP Trusts
- Charitable Trusts
- Generation-Skipping Trusts
- Life Insurance Trusts
- Grantor Retained Annuity Trusts
Another common reason for modifying your estate plan to incorporate an irrevocable trust is to protect property. Assets can be protected from creditors, from irresponsible beneficiaries, or to maintain a disabled beneficiary’s right to receive government benefits. Examples of trusts that can be used to protect property include:
- Spendthrift trusts that allow you to protect and control gifts made to beneficiaries who cannot be trusted to manage the assets themselves. This also protects the assets from the beneficiary’s creditors.
- Special needs trusts that provide financial support to disabled beneficiaries without affecting their ability to qualify for government benefits.
Are you planning to modify your estate plan with a estate plan with an irrevocable trust? Consider carefully whether an irrevocable trust is the right choice for your family. For more information about how we have helped other clients modify their estate plans, view our client testimonial page today.