What is an Irrevocable Trust?
Irrevocable Trust
In an Irrevocable Trust, the grantor gives up his or her rights to change the terms of the trust without the permission of the beneficiary. Likewise, the beneficiary is not allowed to make modifications to the trust. The terms of the trust must be reached before the trust can be modified or altered. In some cases, the court will intervene and make changes depending on the circumstances, but this is rare. An Irrevocable Trust is different from a Revocable Trust because once the Irrevocable Trust is signed, it cannot be amended. A Revocable Trust, on the other hand, can be amended or changed at any time.
Why use an Irrevocable Trust over other kinds of Trusts?
People often set up Irrevocable Trusts to protect their assets from estate taxes. When the grantor places their properties into a trust they are no longer the owner of these properties. This means that they cannot be taxed for whatever has been placed into the trust. This can also help prevent the grantors’ survivors from having to pay estate taxes once the grantor passes away. Putting estates into a trust also keeps them from being attacked by creditors. In New Jersey, an Irrevocable Trust allows one’s families to avoid probate law, so they save on the expenses that usually go into probate administration.
People also use an Irrevocable Trust when they are participating in charitable estate planning. By placing properties and other assets into a Charitable Trust, the grantor is able to receive an income tax deduction. If the assets are transferred into the charitable estate while the grantor is alive, the grantor receives the income tax deduction. If the grantor is dead when the transfer is made, his estate receives the tax deduction.
Irrevocable Life Insurance Trust:
When one dies, the proceeds from their life insurance is also subject to the estate tax, but through an Irrevocable Life Insurance Trust, this can be avoided. You can transfer your life insurance policies into your Irrevocable Life Insurance Trust. By doing this, you give up incidents of ownership from the policies. In other words you no longer own the policies. Since you no longer have ownership, they will not be taxed as a part of your estate once you die.
Next Steps:
While it is possible to create an Irrevocable Trust without a lawyer, that is not something that is recommended. It is a complicated process that is difficult to unwind if done incorrectly. As always, it is best to go to an estate planning attorney from the state of New Jersey who can make sure that your trust lines up with New Jersey state laws. An estate planning attorney can also help you decide if you should be using an Irrevocable Trust, a different kind of trust, or any kind of trust at all. Since an Irrevocable Trust is permanent, you want to make sure that you are positive about the terms in it before you sign it and make it official.
Why use an Irrevocable Trust over other kinds of Trusts?
People often set up Irrevocable Trusts to protect their assets from estate taxes. When the grantor places their properties into a trust they are no longer the owner of these properties. This means that they cannot be taxed for whatever has been placed into the trust. This can also help prevent the grantors’ survivors from having to pay estate taxes once the grantor passes away. Putting estates into a trust also keeps them from being attacked by creditors. In New Jersey, an Irrevocable Trust allows one’s families to avoid probate law, so they save on the expenses that usually go into probate administration.
People also use an Irrevocable Trust when they are participating in charitable estate planning. By placing properties and other assets into a Charitable Trust, the grantor is able to receive an income tax deduction. If the assets are transferred into the charitable estate while the grantor is alive, the grantor receives the income tax deduction. If the grantor is dead when the transfer is made, his estate receives the tax deduction.
Irrevocable Life Insurance Trust:
When one dies, the proceeds from their life insurance is also subject to the estate tax, but through an Irrevocable Life Insurance Trust, this can be avoided. You can transfer your life insurance policies into your Irrevocable Life Insurance Trust. By doing this, you give up incidents of ownership from the policies. In other words you no longer own the policies. Since you no longer have ownership, they will not be taxed as a part of your estate once you die.
Next Steps:
While it is possible to create an Irrevocable Trust without a lawyer, that is not something that is recommended. It is a complicated process that is difficult to unwind if done incorrectly. As always, it is best to go to an estate planning attorney from the state of New Jersey who can make sure that your trust lines up with New Jersey state laws. An estate planning attorney can also help you decide if you should be using an Irrevocable Trust, a different kind of trust, or any kind of trust at all. Since an Irrevocable Trust is permanent, you want to make sure that you are positive about the terms in it before you sign it and make it official.