Estate planning is not for the faint of heart. It is a real challenge, figuring out how to protect assets from going into the wrong hands and protecting loved ones from dealing with various issues that may arise regarding your estate after your death. Trusts are a wonderful way to accomplish estate planning goals, but what kind do you need? If you want to place assets in a trust while you are still alive in order to achieve some tax benefits, an irrevocable trust may be what you need.
What are the benefits of an irrevocable trust? Are there any disadvantages to using this type of trust? Will an irrevocable trust help avoid probate in New York?
The most significant benefit of an irrevocable trust is that it essentially removes assets from a grantor's taxable estate -- offering, as previously stated, some great tax benefits while you are alive and even after your death. Another benefit of an irrevocable trust is that you set the terms. This can help prevent misuse of trust assets by the trustee and your beneficiaries. Other ways an irrevocable trust may be useful to you is that:
- You can gift assets to the trust but still remain in control of them.
- You can gift your primary residence to your beneficiaries in order to avoid tax issues.
- You can house your life insurance policies within the trust so that these funds are not death proceeds.
These are just a few benefits of this type of trust. Your estate planning attorney can give you the full run-down on how an irrevocable trust may benefit your specific situation.
There are both advantages and disadvantages to irrevocable trusts. The most significant disadvantage to an irrevocable trust is that, once it is in place, one cannot terminate or modify it without you first receiving consent from your beneficiaries. You, as the grantor, can also not place yourself in the trustee position while you are alive, if you wish to take advantage of the tax benefits offered with this type of trust.
It is possible that creating a trust, whether it is irrevocable or any other type, can help your loved ones avoid the probate process after your death. It all depends on how one writes the trust and who is the Trustee. If everything is in order, the Trustee may distribute assets without court interference.
At the end of the day, an irrevocable trust is far more complex than a revocable one. That is not a bad thing, though. There are reasons as to why it may be the better option for you. With legal guidance, you can create and fund the type of trust that is right for your needs.