As the name implies, an irrevocable trust is a trust that cannot be revoked, modified, amended, or terminated by its creator (the grantor) with very limited and specific exceptions. Once the grantor has transferred an asset into the trust, it removes his/her right of ownership and that asset will no longer be considered the property of the grantor. This is the opposite of a revocable trust which allows the grantor to modify or even terminate the trust at any time for any reason. Also, unlike a revocable trust, it is not recommended that the grantor designate himself as the trustee.
An irrevocable trust consists of three components:
Usually the main reason for creating an irrevocable trust is for tax and estate considerations. The assets held in the trust may include, but are not limited to, cash, homes, businesses, investment assets, and life insurance policies. The funds will be managed by the trustee in accordance with the instructions set forth in the trust.
An irrevocable trust may also be used to prevent assets from being misused by future beneficiaries and distributed with specific instructions and conditions. It also allows the grantor to remove appreciable assets from the estate and gives the beneficiaries a step-up in basis in valuing these assets for tax purposes.
An irrevocable trust is a more complex legal arrangement than a revocable trust. Because there could be current income tax and future estate tax implications in the use of an irrevocable trust, it is important to seek the guidance of an experienced estate planning attorney.
A knowledgeable estate planning attorney will carefully review your finances, debts, and family situation to determine whether an irrevocable trust is the right estate plan for you. Irrevocable trusts offer numerous advantages for some families, but can also present challenges. It is vital that you carefully review all of the pros and cons of this type of trust with your estate planning attorney before proceeding with an irrevocable trust.
Melone Hatley is a general practice law firm based in Reston and serves the Northern Virginia area. Our practice areas include Family Law, Divorce and Special Needs Children, Traffic Ticket Defense, DUI/DWI Defense, and Trust and Estate Law. Our philosophy is to provide all of our clients with the highest quality legal representation, innovative legal solutions, and unsurpassed dedication to customer service. Through our high standards, we strive to be a trusted resource to our clients.
We know from experience that a successful attorney-client relationship depends on our ability to understand your needs and objectives. For more information about irrevocable trusts and estate planning, contact our office today at 703.995.9900 or visit our website: www.MeloneLawPC.com.