What is an irrevocable trust?
Trusts are a vital part of estate planning in Virginia. Revocable, living trusts are the most common type of trust, but irrevocable trusts offer an alternative to this traditional estate planning tool. An irrevocable trust is a trust that cannot be revoked or amended by the creator of the trust, with some limited exceptions. Irrevocable trusts have more stringent guidelines than revocable trusts, but offer some protections that a revocable trust cannot.
Options for Irrevocable Trusts
Once an irrevocable trust is created, the creator or grantor will transfer assets into the trust for safekeeping. The funds will be managed in accordance with instructions set forth in the trust. Assets placed into an irrevocable trust will no longer be considered the property of the grantor. Generally, unlike a revocable trust, it is not recommended that the grantor designate him or herself as the trustee.
There are numerous different options that exist today for creating an irrevocable trust in Virginia. Once such option is a Dynasty Trust. A Dynasty Trust is set up to provide future generations with income and funds for decades to come. In addition, or in the alternative to a Dynasty Trust, individuals can elect to create an Irrevocable Life Insurance Trust, which places life insurance proceeds into a trust in order to eliminate estate taxes.
Benefits of an Irrevocable Trust
Irrevocable trusts offer several benefits over a revocable trust. Since the transfer of assets into an irrevocable trust creates a permanent change of ownership, property held in the trust will not be subject to probate upon the death of the creator. This allows the grantor and beneficiaries of the irrevocable trust to avoid the time and expenses of probate. Additionally, the grantor will not be personally liable for taxes on the funds.
Even further, assets within the trust are not generally subject to creditors of either the grantor or named beneficiaries. For the parents of children with substantial debt, an irrevocable trust may provide the protection both you and your heirs need. Your estate planning attorney will carefully review your finances, debts, and family situation to determine whether an irrevocable trust is right for you. Irrevocable trusts offer numerous advantages for some families, but can also present some 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 your estate plan.