Irrevocable Trusts

If you are looking for a reliable way to bequeath your assets, an irrevocable trust agreement is a smart choice. This type of document allows you to clearly define where your assets should go and who should manage them. As the name implies, an irrevocable arrangement cannot be taken back. Once it is finalized, you usually cannot change it or take any funds from it. To see whether an irrevocable trust is right for you, it is a good idea to learn a little more about what they are and how they work.

Types of Irrevocable Trusts

There are several different types of trusts that are irreversible. You can use an irrevocable trust form to do everything from leave money to charity to protect your funds from a lawsuit. Depending on your needs, you may want to consider one or more of these types of arrangements.

Irrevocable Living Trust

These are called living trusts because they are created and used while you're still alive. When you create this sort of agreement, you typically draft documents that name you as the main beneficiary. You can continue to use the assets in the trust and benefit from them while you're alive. Once you pass away, the assets then move on to your next designated beneficiary.

Irrevocable Life Insurance Trust

An irrevocable life insurance way is one of the most convenient and budget-friendly ways of dealing with life insurance payouts. If you pass away with a life insurance policy, the proceeds from the policy go straight into the trust. This is useful because it lets your beneficiary get the funds without having to pay the usual taxes on them. Using a California Irrevocable Life Insurance form for life insurance makes the process of collecting life insurance payouts a lot more straightforward.

Special Needs Trust

A special needs trust can be a living trust that functions while you're alive, or it can be an arrangement that goes into effect after you pass away. The main goal of this trust is to care for a person with special needs. The trust contains assets to fund the person's life and a beneficiary who can make decisions on behalf of the person with special needs. They ensure that a person with special needs gets proper care instead of having to figure out how to manage their finances themselves.

Asset Protection Trust

If you are concerned about a creditor taking your assets, an asset protection trust is a smart move. Using this type of irrevocable trust form allows you to take certain assets and put them beyond the reach of creditors. As long as you are the designated beneficiary, you can continue to use the assets or benefit from income on the assets. Once the items are in the trust, your creditors cannot repossess the items. If you are in a lawsuit, items in the trust cannot be taken to compensate the other party.

Charitable Remainder Trust

This helpful concept is ideal for those who want to leave a portion of their assets to charity. When you create a charitable remainder trust, you're making a type of living trust that lets you place assets in a trust and continue to use them for the rest of your life. Once you pass away, you can have the rest of the assets go to a charitable organization. Not only does it reduce taxation for the charity later on, but it also helps to protect your assets while you are alive.

Grantor Retained Income Trust

A grantor retained income trust is somewhat similar to a charitable remainder trust. It starts with an irrevocable agreement where you place certain income-producing assets in a trust. For a certain amount of time, you get to enjoy all the income from these assets. Then, once a time limit is reached or you pass away, the assets go to your beneficiaries.

Qualified Personal Residence Trust

This is a unique type of arrangement that works very well for people in areas with soaring property values. A qualified personal residence trust is a type of document that essentially freezes your property value for tax purposes. When you create this agreement, your property is appraised and transitioned into a trust. You can live in the house for a set amount of time, which you determine, before transferring the house to your beneficiary. When they receive the trust, they only have to pay taxes on the value of the property at the time the agreement was created. Though this irrevocable trust agreement is complex to set up, it can save thousands in taxes.

Pros of an Irrevocable Trust

These arrangements can save your beneficiaries a lot of money on taxes. The other big advantage is that they let you decide exactly what will happen to your assets. If you just give your beneficiaries money in your will, they can spend it on any frivolous purchase they like. With a trust, you can do things like specify the money must be used for college. Irrevocable agreements also have some unique benefits not found in other types of estate plans. They can't be altered, so they're useful in situations where a beneficiary needs reassurance you will not change your mind later. The assets inside the trust are thoroughly protected, so creditors can't take them.

Irrevocable Trusts vs. Revocable Trusts

California irrevocable trust agreements and revocable trusts are two very different types of documents. Both involve placing assets in a trust and stating what you want to happen to the assets. However, revocable trusts can be altered at any time by the person who created them. Irrevocable trusts are not a decision you can take back. If you leave money to someone with an irrevocable agreement, you cannot disinherit them easily after an argument. You only have the option of altering an irrevocable agreement if every involved party agrees or you can prove in court that new and unforeseen circumstances require a change.

Want to Know Which of These Trusts Would Benefit Your Situation? Call a Lawyer!

Trusts are a very versatile estate planning tool. Whatever your situation, there is probably an irrevocable trust agreement that could help you. At Citadel Law Team, we specialize in helping our clients find creative and effective ways to manage their estate planning. Our team is happy to talk about your circumstances and discuss your trust options. Call (800) 662-0882 today for a free consultation.