By Lisa Marie Vari of Lisa Marie Vari & Associates of Lisa Marie Vari & Associates, P.C.posted in Wills and Estates on Thursday, February 6, 2014.
By: Lisa Vari on G+
An irrevocable trust is a way to protect your assets – and who wouldn’t want to do that? There are many benefits to placing your funds in an irrevocable trust. This is usually done as an alternative to gifting – or giving the money to someone in your family or sometimes someone outside of your family. However, unless the person that money is gifted to is a very trusted individual, there are many risks involved with the gifting of money. This is why it is smart to consider an irrevocable trust.
An irrevocable trust allows the person making the trust (“the grantor”) to retain a great level of control over the trust as opposed to gifting the money to a family member or the like. The grantor can also appoint a person to be in charge of the trust distributions in order to ensure that distributions of trust funds are not arbitrarily given away. The grantor of the trust can also receive income from the trust.
Probably the most advantageous aspect of putting funds or assets into an irrevocable trust is that the grantor protects those funds/assets from loss. Specifically, the grantor can include “spendthrift” language in the trust document, ensuring that the beneficiary’s creditors cannot reach the trust funds if the beneficiary does not act prudently with regard to trust assets.
Lastly, there are tax advantages associated with placing funds/assets in an irrevocable trust. Namely, the grantor usually owes much less in capital gains tax if they place funds in an irrevocable trust rather than outright gifting the funds/assets.
Of course each situation should be assessed after speaking with an experienced estate attorney to determine if it is prudent to create an irrevocable trust.