What is an Irrevocable Trust?
What is an Irrevocable Trust? An Irrevocable Trust is a one part of estate planning. You create an Irrevocable Trust while you are alive. As the creator, you are the Grantor.
Think of a Irrevocable Trust as a will replacement. As Grantor, you decide what assets are owned by the Trust. You decide how to use those assets. When you die, the Trust follows your instructions on distributing the assets. You control who will receive the Trust assets. You control when those persons receive the assets.
Unlike a Revocable Living Trust, you cannot change an Irrevocable Trust once created.
Who are the Trust Parties?
Three parties form a Trust. You, as the Grantor, create the trust document. The Grantor transfers assets into the Trust. You, as Grantor, determine the rules for the Trust.
The Trustee follows the Trust’s instructions. The Trustee invests trust funds, uses trust property for the Beneficiaries’ needs and pays administrative expenses.
Beneficiaries are the persons who receive the Trust assets and/or income. As a Beneficiary, you do not have to do anything. You just receive funds from the trust.
Should You Get an Irrevocable Trust?
An Irrevocable Trust is not for everyone. If you are very wealthy, you may want an Irrevocable Trust to reduce your taxable estate.
Do you have a disabled dependent? Or perhaps you have a blended family and want to make sure your children will inherit from you if you are the first to die. Then an Irrevocable Trust may work for you.
Unlike a Revocable Living Trust, an Irrevocable Trust may protect you from creditors. The Trustee must be unrelated to the Beneficiaries.