Creating a comprehensive estate plan is a primary consideration for adults. One estate planning tool that some people use alongside other helpful estate planning resources is a trust. There are two primary types of trusts – revocable trusts, which can be changed but provide limited protection and irrevocable trusts, which can’t be changed but provide considerable protection.
Understanding the benefits of irrevocable trusts may make it easier for individuals to determine if these are appropriate for their estate plan. These protections are possible because the grantor, or person who creates the trust, relinquishes control of the assets once the trust is funded.
Customization of terms
The grantor can set specific terms for the irrevocable trust to ensure that it’s handled according to their wishes. Whether it’s setting conditions for distribution, specifying the purposes for which trust funds can be used or designating trustees to manage the trust, the customization options are vast. This level of control, exercised at the creation of the trust, ensures that the grantor’s intentions are carried out precisely.
Privacy for beneficiaries
Irrevocable trusts offer a significant degree of privacy for the beneficiaries. The terms of an irrevocable trust remain private because trusts don’t go through the probate process. This privacy protects the beneficiaries from unwanted scrutiny and public exposure of their inheritance, ensuring that the details of the estate are disclosed only to those directly involved.
Creditor protection
Since the grantor legally relinquishes ownership of the assets placed into the trust, those assets are typically beyond the reach of creditors seeking to satisfy claims against the grantor. This level of creditor protection is particularly valuable for individuals in professions with a high risk of litigation, as it ensures that the assets intended for beneficiaries are preserved regardless of any financial difficulties the grantor may face.
Setting up an irrevocable trust requires a grantor to consider the terms they’re including in the trust carefully. Obtaining legal assistance throughout the process enables a grantor to ensure that the structure of their trust reflects their needs and expectations.