Irrevocable trusts are a popular tool for avoiding taxes and making sure your wishes are carried out after your death. If you are interested, here are some details you should know.
What is an Irrevocable Trust?
A trust is a separate legal entity that can own and control assets. Just like a person or corporation, a trust can own things like cash, stocks, or real estate. A person or corporation uses property for themselves, though. A trust, on the other hand, controls property for someone else.
A trust involves a three-way relationship. A trust is created by a “settlor,” which is sometimes also called a donor or grantor. The settlor puts assets into the control of a “trustee” (or a group of trustees). The trustee manages the assets for the “beneficiary.” One common example might be a grandmother acting as a settlor, and having her child act as a trustee, with instructions to manage some money for the benefit of a granddaughter.
Why Make it Irrevocable?
Moving assets to an irrevocable trust is a way for a settlor to make a complete break from those assets for tax or liability purposes. As lawyers like to say, it removes the “incidents of ownership.” For tax purposes, that means the person moving funds to an irrevocable trust would no longer have those funds counted for tax purposes. This is especially important for estate taxes. For liability, it might mean transferring a historic home to a trust so that the settlor is no longer liable if someone falls and gets injured in that property.
Setting it Up
When setting up a trust, you need to first figure out the basics. You need to choose a beneficiary, and then you need to choose a trustee. You need to figure out what assets will be put into the trust. Then you need to lay out clear instructions for the trustee. For many people, this is as simple as choosing a bank to manage the trust in a way that minimizes taxes for your heirs. For others, it can be much more complicated.
A trust has to be set up to run itself without the person that created it. If you want the trustee to provide a limited amount of funds to aid your grandchildren, you need to explain how much. If you want the trust to give money to charity, you want to explain what kind of charities. You might pick a friend or trusted colleague to be a trustee, or you might want to choose a professional like a banker or a lawyer. Clear instructions to a reliable trustee are the key.
Call Jesse Thomas at Idaho Legal Estates and Probate
Placing your assets in an Irrevocable trust is a huge decision, When making such a big decision, you should employ an expert like Jesse Thomas who has focused his work entirely on trust, estate, probate issues. Call for an appointment today!