Irrevocable Trust Legal Rights
An irrevocable trust is a legal tool you can use as part of an estate plan to handle your property both in life and at your death. Although the details can vary from state to state, the law generally does not significantly limit your rights regarding an irrevocable legal trust. Instead, your rights will be limited largely by what terms are put in the trust document.
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General Definition
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An irrevocable trust is a legal relationship involving a trustor (the person who creates the trust), a trustee (the person who manages the daily affairs of the trust) and one or more beneficiaries (the people who receive trust income and disbursements). A trust is irrevocable, as opposed to revocable, when the trustor does not have the right to unilaterally terminate the trust.
Time Frame
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An irrevocable trust generally continues to exist until one of the following happens: (a) the trust terminates according to a deadline put into the original terms of the trust document, or (b) a court, or judge, orders the trust terminated or (c) the trustee and all of the beneficiaries consent to terminating the trust. This means that if you create a trust during your life, the trust will continue to exist even when you die.
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Features
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Trusts are governed by state law, which means the details can vary depending on what state you live in, but most state laws follow the same general principles, including the idea that the trustor is relatively free to define the terms and features of the trust. Commonly, a trust will hold property and if that property produces income, such as an apartment unit producing monthly rental income, the income is disbursed to the beneficiary(ies). Also common is a feature that when the trustor dies, all of the property---not just the income---is conveyed to a family member, loved one or charity.
Benefits
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An irrevocable trust provides numerous benefits, including (1) avoiding probate of any property that is held by the trust, (2) allowing for the professional management and investment of the trust property, (3) providing income tax savings on income-producing property such as an apartment unit, (4) protection of the trust property from the trustor's personal creditors and (5) potentially saving estate and/or inheritance taxes on the property placed in the trust.
Warning
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If you are considering creating an irrevocable trust, you should keep in mind that before you create the trust, you have all of the power. You can define the terms of the trust, including who receives the benefit of the trust, what property will go into the trust, how long the trust will last, what happens to the trust property when the trust terminates and who will act as trustee of the trust. However, because the trust is irrevocable, you lose a lot of control the minute the trust springs into life. Any property you put in the trust remains in the trust according to the terms. You have the legal right to do what you want with the trust initially, but once the trust is created, your rights are significantly diminished. You cannot change your mind later, so plan carefully and think ahead long before you sign the documents finally creating the trust.
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