Creating a comprehensive estate plan often requires employing various estate planning tools to accomplish your goals. Among those tools may be the creation of a trust.  In general, trusts offer flexibility and tax and probate advantages.  Before deciding which type of trust is best for you, a basic understanding of the advantages of different types of trusts is essential.

An irrevocable trust is a trust that is typically created and put into effect during your lifetime.  Unlike a revocable trust, an irrevocable trust cannot, under most circumstances, be modified, amended or terminated once created. Most states do provide for court procedures to modify or terminate an irrevocable trust; however, if you elect to create one, consider it to be unchangeable.

The primary advantages of an irrevocable trust relate to estate taxes and probate. Once you designate assets to fund an irrevocable trust, those assets become trust property. As trust property, they are no longer owned by you. Only property owned by you is included in the probate process and included in estate tax calculations. Considering the often high rate of estate taxes, a sizable irrevocable trust can save a substantial amount of money in estate taxes as well as months of waiting through the probate process.

One pitfall to avoid, however, is creating an irrevocable trust too close to the time of death. Assets transferred “in contemplation of death” will revert back to the decedent’s estate and be included for estate tax purposes.

The Law Offices of Richard B. Schneider, LLC is a member of the American Academy of Estate Planning Attorneys.

Tags: Estate Planning, irrevocable trust, trust

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