What Is An Irrevocable Trust?
Trusts are a vital tool in estate planning, and irrevocable trusts are one of the most popular types of trusts. An irrevocable trust cannot be modified or revoked after it is created. This can provide a number of benefits, such as protecting assets from creditors. However, because irrevocable trusts will require a person to give up control of their assets, they should only be used after careful consideration and with the help of a qualified attorney.
At The Marques Eason Law Group, we have a strong understanding of the laws that affect estate planning and the various tools that may be used to manage and protect assets, provide for the needs of different family members, and ensure that a person's wishes will be followed. When you work with us, we will help you evaluate the potential benefits and drawbacks of an irrevocable trust, as well as any other options that may be available to you. Our goal is to help you create a comprehensive estate plan that will provide you with financial protection and meet the needs of you and your family for years to come.
Types of Irrevocable Trusts
Once an irrevocable trust is created, the trust creator (also known as the settlor or grantor) gives up all control over the trust and the assets that are placed into it. A trustee will be named who will manage the trust and distribute assets in the trust to different beneficiaries according to the grantor's instructions. Irrevocable trusts can shield assets from being seized in a lawsuit or bankruptcy proceeding. They can also be used to reduce estate taxes, since the assets in the trust are no longer considered part of the settlor's estate.
There are multiple types of irrevocable trusts that may be used for different purposes, including:
- Asset protection trusts - Both domestic and offshore trusts may be used to ensure that assets will not be accessible to a person's creditors. These trusts will often have spendthrift clauses that specify when beneficiaries can access their trust funds, such as after they reach a certain age or under certain circumstances.
- Irrevocable life insurance trusts (ILIT) - Any life insurance policies owned by the settlor may be transferred into an irrevocable trust, allowing the benefits to be paid out according to the settlor's instructions. This will ensure that life insurance benefits will not be considered part of a person's estate, which can help to minimize estate taxes and avoid gift taxes.
- Qualified personal residence trusts (QPRT) - A person may transfer their primary residence into a trust and make arrangements to transfer ownership of the property to their heirs while still retaining the right to live there for a specified period of time.
- Grantor retained annuity trusts (GRAT) - This type of irrevocable trust is often used for transferring potentially high-growth assets, such as stocks or real estate, to beneficiaries without incurring significant gift or estate taxes. The grantor will be able to receive an annuity from the trust each year, and after the trust expires or the grantor dies, the remaining assets may be distributed to beneficiaries.
- Charitable trusts - A person may place assets in an irrevocable trust and make arrangements to donate them to charitable organizations. With a charitable remainder trust, the grantor may receive income from the trust during their lifetime or make distributions to other beneficiaries, and after their death, the remaining assets will be donated to a charitable organization. With a charitable lead trust, the trust will make distributions to a charitable organization during the lifetime of the grantor, and after their death, the remaining assets may go to designated non-charitable beneficiaries.
- Testamentary trusts - This type of trust may be created through a person's will, it will go into effect after their death. The trust can provide for the needs of beneficiaries, such as minors or individuals with special needs, while ensuring that assets are distributed according to the settlor's wishes.
Contact Our Cook County Irrevocable Trust Attorney
There are many ways to use irrevocable trusts in estate planning, and these trusts can provide valuable asset protection benefits while ensuring that the needs of a person and their loved ones will be met. If you want to know more about how to create a comprehensive estate plan, The Marques Eason Law Group can provide you and your family with guidance, and we will make sure you take the correct steps to protect your assets and ensure that your wishes will be followed. Contact our office today by calling 773-973-3755 and arranging a consultation.