Irrevocable trusts are popular options for people when they are going through the estate planning process for various reasons. These are not uncommon options, but most people tend to put regular trusts in place. When the option exists to create an irrevocable trust, you should educate yourself as to what it entails and how it can be beneficial for you.
In short, an irrevocable trust is a trust that cannot be terminated or amended without permission from the beneficiary of the trust. This means that even though the grantor had the trust created, he or she relinquishes all of his or her rights to the property and assets added to the trust upon its creation.
The main advantage to creating an irrevocable trust in California is for considerations when it comes to taxes and your estate. When it comes to estate considerations, an irrevocable trust eliminates all incidents of ownership from the grantor, which means he or she is no longer responsible for the assets in his or her estate. This means that the assets can no longer be taxed as part of the grantor's estate, including the income generated by the assets.
Irrevocable trusts can hold any of the following assets: a business, cash, investment assets and life insurance policies.
Another benefit of an irrevocable trust is that it can be used to prevent assets from being misused by the grantor's beneficiaries. The trust can hold the assets and then distribute them using conditions created by the grantor of the trust.
An irrevocable trust can also be used to gift a residence to the grantor's children using more favorable tax laws. It can also be used to gift assets or have them removed from the estate while the grantor continues to keep the income from them.
What is an irrevocable trust and how does it benefit you as the creator? How does it benefit the beneficiary? These questions and more can be answered by an experienced estate planning attorney in Newport Beach, California.
Source: Investopedia, "Irrevocable Trust," accessed June 29, 2017