As an adult, one of your most important tasks is to create an estate plan. These plans serve several purposes, including setting up a plan for end-of-life care and determining how to care for loved ones after you pass away.
As you’re setting up an estate plan, you’ll need to evaluate the methods that you have to pass down assets to heirs. One of these involves setting up trusts, which can be either revocable or irrevocable. You can change the terms of revocable trusts, but you can’t change the terms of an irrevocable trust.
Asset protection
When you establish and fund an irrevocable trust, you relinquish control over the trust’s assets. You can’t change these trusts or dissolve them unless you have the beneficiaries’ approval or the court’s permission. Because you don’t have control over the trust, creditors can’t make claims against the trust in an effort to collect from you. This helps to ensure that your beneficiaries are able to receive what you intend.
Privacy
Irrevocable trusts don’t go through the probate process like a will does. This means that the terms of a trust, including who gets what, aren’t entered into public court records. For many, privacy is critically important so people don’t hear about the inheritance and try to take advantage of them.
Remember, an irrevocable trust is only one part of a comprehensive estate plan. Setting up other components, such as powers of attorney designations, can also help to protect your estate so you can provide as much support as possible to your loved ones after you pass away.