An irrevocable trust is a type of trust that cannot be changed once it has been established. This means that assets placed in the trust cannot be taken out again. Although it can seem like a strange thing to do, creating such a trust can have significant tax benefits, providing beneficiaries with tax savings on estate taxes and life insurance benefits. A trust that is irrevocable also protects assets from the claims of creditors, because once an asset is placed in this type of trust it cannot be attached by creditors.
1. Make a list of the beneficiaries of your trust. This decision will be permanent, so you need to choose wisely. One way to handle this is to list all possible beneficiaries, then take some time to give serious consideration to each one before including him in the trust.
2. Establish a value for any non-monetary assets you intend to place in the trust. This usually requires that you have the item appraised by a skilled appraiser. Determine which assets you will include in your trust. You have the option of adding assets to the trust at any point, so if you aren’t sure about something you don’t need to include it in the trust right away.
3. Set up the trust deed and create the trust. The paperwork will need to be witnessed and notarized. You may also want to consult a lawyer or other trust specialist before finalizing your deed, because once it is signed you cannot make changes.
4. Fund the trust by transferring your assets into it. Depending on where you live and what type of assets you are transferring, the process may vary somewhat. In general, you need to sign over each item that now belongs to the trust. This includes bank accounts, vehicle titles and real estate deeds. The owner of all items in the trust becomes the trust itself and is no longer you. Management of the assets is handled by the trustee.
- You can place some of your assets in an irrevocable trust if you are concerned that you may be sued. This is a good plan for professionals working in medicine, the legal profession and any other areas where lawsuits may be a frequent occurrence. Assets in an irrevocable trust cannot be attached as a result of a lawsuit, so anything in the trust will be there to take care of your family.
- Be absolutely certain when you create your irremovable trust that you aren’t going to change your mind. Once the trust is created, you cannot change the terms of the trust.
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