An irrevocable trust is a type of Trust that cannot be modified or nullified after it's been created.
Irrevocable trusts are commonly used during Estate Planning because they can be an effective way to protect assets, ensure they are distributed according to a deceased person's wishes and maximize an Estate's value.
There are many pros and cons to an irrevocable trust:
Asset protection: Assets in an irrevocable trust are protected from Creditors, lawsuits, and other potential threats, which can provide peace of mind for the beneficiaries.
Tax savings: An irrevocable trust can be structured to reduce or eliminate Estate Taxes, which can save beneficiaries a significant amount of money.
Probate avoidance: Assets held in an irrevocable trust do not go through Probate, which can save time and money for the beneficiaries.
Distribution control: The creator of an irrevocable trust can set specific conditions for how and when assets are distributed which can ensure that they are used in the intended manner.
Lack of flexibility: Once assets are transferred into an irrevocable trust, the grantor cannot change or terminate the trust; this lack of flexibility can be a drawback if circumstances change.
Loss of control: Once the assets are transferred to the trust, the grantor no longer has direct control over them. The trustee is responsible for managing the assets and making distributions to the beneficiaries.
Complexity: Setting up an irrevocable trust can be a complex process that requires the assistance of an experienced estate planning attorney.
Cost: Establishing an irrevocable trust can be expensive, and ongoing administration fees may also apply.
Irrevocable trusts can be an effective mechanism for estate planning, but it's best to speak with an Estate Attorney to determine if it's the right option.