It is always a good idea to get started with creating your estate plans sooner rather than later. As you begin to consider what forms of estate planning are best for you, you might think about creating a trust.
A trust is a legal document that allows a third party, called a trustee, to hold assets on behalf of one or more beneficiaries. The person who creates a trust to hold their property or assets is called the grantor of the trust.
If you are thinking about making an irrevocable trust, or want to consider other forms of estate planning, an experienced California estate planning attorney can help. The attorneys at Galanti and Copenhaver can help you create the best estate plan for your needs.
What Is an Irrevocable Trust?
An irrevocable trust is a trust in which the terms cannot be changed, amended, or terminated unless special circumstances apply. However, under California Probate Code section 15404(a), if all of the beneficiaries and settlors of a trust unanimously approve the change or termination of the trust, that can be accomplished without court approval.
An irrevocable trust is basically the opposite of a revocable trust. The grantor of a revocable trust may modify the trust at any time.
When a grantor makes an irrevocable trust, they transfer ownership of the assets and property to the trust. This means that the grantor will no longer have legal title and ownership of the assets within the trust, and the trust itself. It is important to keep this in mind because creating an irrevocable trust means that you will have to give up control over the assets held in the trust.
Benefits of an Irrevocable Trust
There are a few major benefits of creating an irrevocable trust. First, creating any form of trust generally allows your beneficiaries to skip the probate process for the assets and property held in the trust. Probate is a lengthy and expensive process, and using a trust in your estate planning can make things easier for your loved ones.
If you are thinking about creating an irrevocable trust rather than a revocable trust, it is helpful to know the benefits specific to irrevocable trusts. One of the main benefits of setting up an irrevocable trust is to pay less in estate taxes.
Since ownership is transferred from the grantor to the trust, the assets and property within the trust are removed from the grantor’s taxable estate. This may not be a concern for everyone, but if your estate is very large, it is something to consider. Additionally, the grantor will be relieved of tax liability on any income that the assets in the trust generate.
Another benefit of choosing an irrevocable trust is that you, as the grantor, can set conditions for distribution to the trust beneficiaries. This can be useful if you have concerns that one or more beneficiaries may misuse the assets.
Irrevocable trusts can be very useful in situations where you have a lot of debt and want to protect your estate from creditors. Since any assets that are placed in the trust are legally transferred to the trust for ownership purposes, creditors should not be able to access these assets for payment of debts. This can make things easier for your beneficiaries down the road.
Are There Different Types of Irrevocable Trusts?
Yes, there are a few different types of irrevocable trusts. An attorney can help you decide what is best for your individual needs.
A common type of irrevocable trust is a life insurance trust. A life insurance trust is designed to protect the proceeds of a life insurance policy against estate taxes and creditor claims. Another type of irrevocable trust is a split interest trust. A split interest trust is designed to provide income to one group of beneficiaries during a specified period of time, and then provide income to a different group of beneficiaries at another time.
Do I Need an Attorney to Make an Irrevocable Trust?
Irrevocable trusts can be complex. Hiring an attorney to help you create an irrevocable trust is often the best way to go, especially if you want to include terms and conditions for distributions of the assets to your beneficiaries.
An experienced estate planning attorney can make the process go much smoother for you. An attorney can also make recommendations on other aspects of estate planning to ensure that you are truly doing what is best for you and your estate. Contact us today at 707-867-0787 or fill out our online contact form to see how we can help you