Three Things You Should Know About an Irrevocable Living Trust
Posted on: 13 January 2021
A living trust has many advantages for anyone who is planning their estate. However, there are two different types of living trusts. The first is the more popular one referred to as a revocable trust. This type of living trust allows you to make changes during your lifetime. The second is one people are less familiar with. Referred to as an irrevocable living trust, no changes can be made once it is enacted. The following are a few benefits of setting up this type of trust.
1. It will protect assets from lawsuits
Many instances open someone up to the possibility of lawsuits, and not every potential lawsuit will be covered sufficiently by insurance. Your personal assets can be vulnerable. By moving much of your wealth into an irrevocable trust, you are no longer the owner of these assets; therefore, you cannot be sued for them. Those people you specify as beneficiaries will not lose their inheritance because of a lawsuit.
2. It will protect assets from creditors
Just like a lawsuit, because you no longer own the assets, no creditor will be able to touch these assets. In time, you may build up debt, and if you find yourself with a problem with personal debt, your creditors may attempt to sue for your assets, or you may even declare bankruptcy, but all the assets in the irrevocable trust are off-limits to creditors. Naturally, no assets that are attached to a secured loan can be transferred to a trust, it is only those that are free and clear of any claims that can be used in this type of trust.
3. It can protect your heirs from high taxes
Whether your heirs will pay taxes from a living trust will depend upon the laws that are current for both the federal government and the state you reside in. However, in general, irrevocable trusts have important tax advantages for your heirs, especially if you have great wealth. With inheritance taxes, you are allowed several million dollars over the course of a lifetime that can be considered a gift, so they are not taxable. But this ceiling is basically removed for an irrevocable trust. Beneficiaries of an irrevocable trust will not face the inheritance taxation that those of a revocable trust would once the gift ceiling is breached.
There are advantages to an irrevocable living trust that may be important to your estate and personal finances. Ultimately, whether it is right for you will depend upon your particular situation. Your best course of action is to speak with services like Harris Shelton Hanover Walsh PLLC to learn how to handle your specific situation.
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