- An irrevocable trust is an entity that is formed to leave money or assets to a beneficiary. Unlike a revocable trust, an irrevocable trust is permanent. Once it is formed, the granter can't undo it. Any assets the granter puts into the trust, become the property of the trust. The trust states when the beneficiary receives control of the assets. Usually it is upon the granter's death. Some irrevocable trusts specify a certain age that the beneficiary has to be to receive control of the assets. The trust can give over all of the assets at once to the beneficiary, or it can pay out a limited amount over a set amount of time. For instance, the trust could specify that once the beneficiary turns 21-years-old, he will receive$5,000 a month from the trust.
- A trustee is the person who manages the trust. In revocable trusts, the granter often acts as the trustee. In most states, a granter can not serve as a trustee for an irrevocable trust. Most irrevocable trusts use a professional company to serve as a trustee. Banks with trust services offer the service of acting as a trustee for a fee. The irrevocable trust can pay the trustee fees.
- An irrevocable trust is its own tax entity. The trust is responsible for paying taxes on assets. An irrevocable trust has its own tax payer identification number to file taxes under. The trustee usually hires an accountant to file and pay the irrevocable trust's taxes.
- Creditors usually can not go after money or assets that are in an irrevocable trust. The granter's creditors can not go after the assets because they no longer belong to the granter. The beneficiary's creditors can not go after the trust's assets because the beneficiary does not have control of the assets. A beneficiary's creditors cannot go after the assets until the assets have been released from the trust and given to the creditor.
- Assets put in an irrevocable trusts do not go through probate when the granter passes away. In fact, the court does not need to have any involvement in the trust whatsoever, unless there is a legal dispute regarding the trust. Because the court normally does not take any involvement in the trust, assets and transference of assets are not public record.
- Irrevocable trusts can be difficult to set up and run properly. The trust can be considered invalid if it is not written correctly, is not funded properly, or is poorly managed. It is better to have a lawyer or trust company who has experience with irrevocable trusts assist you in starting and managing the trust. Be wary of companies on the Internet who offer trust making services for a low fee. There are many scams out there. Only use a licensed lawyer or bank trust company.
- This article on irrevocable trusts is meant for informational purposes only and is not intended to act as or replace legal advice. Laws in different states vary and each individual situation is different. Seek the assistance of a lawyer or bank trust company to avoid costly mistakes.
