What is an Irrevocable Trust?
Estate Planning Attorney in Thousand Oaks
Although there are ways to provide some planning flexibility, an irrevocable trust is just like it sounds-it is a type of trust that cannot be changed once it is established. A trust may be designed to become irrevocable immediately when the agreement is signed, or after a settlor dies. For example, a revocable living trust is revocable during a settlor's lifetime, but when the settlor dies, the trust is no longer terminable, so the trust becomes irrevocable.
In order to set up a trust that is right for you and your assets, please contact a Thousand Oaks estate planning lawyer at Pederson Law Offices.
Reasons to Establish an Irrevocable Trust
Certain types of irrevocable trusts can reduce estate tax. Irrevocable life insurance trusts, for example, may be used to remove the value of life insurance death benefits from a person's estate, so it cannot be taxed when the person passes away. As with other trusts, the settlor transfers assets to the trustee, who will eventually give the assets to the beneficiaries.
This means that the settlor no longer owns the assets, so they cannot be taxed after the settlor dies. Irrevocable trusts can also provide asset protection for the settlor and the settlor's family. When assets are placed into an irrevocable trust, the settlor no longer has control over, or access to, the items. Absent some exceptions, creditors who are seeking the settlor's assets cannot generally file a claim against the irrevocable trust assets.
Irrevocable trusts may also be used for charitable estate planning. If the settlor transfers assets into the charitable trust while they are living, they will receive a charitable income tax reduction within the same year that the assets were transferred. Items that are transferred after the settlor's death will give the estate a charitable estate tax deduction.
Ventura County Estate Planning Lawyer
Before committing to an irrevocable trust, you must be 100% sure that you are choosing the right type of trust. If you accidentally choose an irrevocable trust, and you meant to select a revocable trust, you may be facing extensive legal and tax consequences. It is beneficial to discuss the different types of trusts prior to committing to an irrevocable trust.
If you wish to learn more about irrevocable trusts, please call our firm today at (805) 372-1507.