Trusts come in two basic varieties: revocable and irrevocable. There are variations of both types, along with significant advantages and disadvantages. This blog looks at 5 specific irrevocable trusts. Each trust has a purpose, a reason to exist. One or all of these trusts may be an estate planning tool that helps you achieve some rather important goals.
Special Needs Trust
It’s fairly obvious what this trust is intended to do – provide support for someone with special needs. Even within this type of trust there are variants. A special needs trust can be a third-party trust that is established by another party on behalf of a disabled individual. It may also be a first-party trust, established by the disabled person.
Because the trust is irrevocable, it cannot be easily changed after it is created. This also helps protect the trust’s assets from creditors. Trust assets are controlled by the trustee, not the beneficiary.
Charitable Remainder Trust
This irrevocable trust is established by a grantor that wants to provide for a charity and receive income from the trust for a period of time. In addition to receiving payments from the trust, the grantor also receives some tax benefits. When the trust terminates, the charity named in the trust (and which has been serving as trustee) receiving the principal remaining in the trust.
Life Insurance Trust
A life insurance trust is another aptly named trust. The grantor’s life insurance proceeds pass directly to the trust. This usually keeps those proceeds from becoming part of the probate estate, which in turn lowers the estate’s potential tax burden. Once this irrevocable trust is established, the grantor names the trust as the beneficiary of his or her life insurance policy or policies.
Unlike many other trusts, the testamentary trust does not exist during the lifetime of the grantor. Instead, this trust is created by the grantor’s Will. These trusts are irrevocable, in part, because the grantor is no longer available to change the terms of the trust.
Asset Protection Trust
If you need to protect your hard-earned assets from anyone – creditors, people who sue you, or ex-spouses – an asset protection trust may be right for you. There are different types of asset protection trusts. As with any other trust, talk to an attorney before establishing one. Choosing the wrong trust can do more harm than good.
Learn More About Specific Irrevocable Trusts
If none of the trusts mentioned in this article are right for you, don’t give up. This is by no means a comprehensive list of irrevocable trust options. An estate planning attorney can review your circumstances and provide options that may fit your circumstances.
The attorneys at Dillon Law Group, PLC can help you with your estate planning concerns. Please contact us at 757-962-4796 to set up an appointment or use the Contact Form on our website, https://www.dillonlawgrp.com/. We have offices in Virginia Beach and Newport News.