What is an Irrevocable Trust?
Washington DC Estate Planning Lawyer Michelle Lanchester Can Help You Decide
There are many types of trusts, including revocable trusts and irrevocable trusts. If you create a revocable living trust, the property in the trust remains yours until you die, and you can modify or revoke the trust at any time. On the other hand, an irrevocable trust is exactly how it sounds – a trust that you cannot revoke. Once you create an irrevocable trust and place property into the trust, you cannot remove the property from the trust. The property is no longer yours; the trust now owns the property.
So, how do you know if an irrevocable trust is right for you? Maryland and Washington DC estate planning attorney Michelle Lanchester can review your entire financial picture to help you make the best decision regarding an irrevocable trust.
The Advantages and Disadvantages of an Irrevocable Trust
An irrevocable trust has some advantages over a revocable trust:
- Tax advantages. Once you place property into an irrevocable trust, the property is no longer yours and will not be a part of your estate when you die. This means a reduced tax burden on your estate.
- Creditor protection. Because the property in an irrevocable trust is no longer your property, that property will be safe from your creditors. Your creditors will not be able to seize or levy upon the property to satisfy any of your personal debts.
- Charitable deductions. Placing property into an irrevocable charitable trust could provide you or your estate valuable tax deductions, depending on when the property goes into the trust (before or after your death).
Irrevocable trusts also have disadvantages, which include:
- No access. Once you create an irrevocable trust, you cannot take property from the trust. If your circumstances change, you cannot modify an irrevocable trust to accommodate your changes in circumstances.
- No control. Once the assets are in the trust, the trustee will distribute the assets per the trust document, and you cannot amend the trust.
- Tax issues. Although irrevocable trusts provide tax benefits, they can cause tax problems, especially if the trust is a life insurance trust and you die before the specified period.
- Expense. If you appoint a trustee to administer the trust, the trustee’s fees are an added cost on top of accounting and legal fees.
Whether an irrevocable trust is the best estate plan for you depends on your situation. Speaking with an experienced estate planning attorney is the first step to choosing the right trusts for your property.
Contact Revocable Trust Lawyer Michelle Lanchester
Maryland and Washington DC estate planning attorney Michelle Lanchester has helped families in the Washington DC Metro and Largo, Maryland areas leave a legacy of love for over 25 years. If you are starting to plan for your family’s future, contact Attorney Lanchester now to set up an initial consultation.