An irrevocable trust is a powerful tool for you to use. Its nature tends to give people the wrong impression about what it achieves and how it impacts you (and your assets) specifically. Whether you choose to create it as part of your estate plan is ultimately up to you and your attorney.
However, don’t dismiss this option and its benefits because of misinformation or a general misunderstanding about it.
The Irrevocable Trust
A fundamental attribute of an irrevocable trust—and one that may cause people to be concerned about them—is its permanence. When you, the grantor, create an irrevocable trust, you permanently put your assets into the trust.
Myth #1: There Is Only One Type of Irrevocable Trust
People may be quick to point out that they don’t want to lose control of their assets. However, that is part of myth #2. To better understand how you could have more control over your assets during your lifetime, it is essential to know there are multiple types of irrevocable trusts.
Some attorneys may simply say “you need an irrevocable trust”. We take a much different approach, where we assess your particular circumstances and suggest a particular kind of irrevocable trust tailored for your specific circumstances. Your estate planning attorney needs to have a command of the mechanics of each type of trust, what it does, what it cannot do, and if it applies to your needs and circumstances. At our firm, we make suggestions based on client goals, whether it be asset protection, avoiding probate, keeping private matters out of the public eye, etc.
Myth #2: You Lose Control Of Your Assets
Not necessarily. For instance, a grantor trust allows you to retain control over the assets in the trust. It is common to make the grantor a trustee as well, the person responsible for managing the assets of the trust. By employing this technique, the grantor/trustee retains control over the assets of the trust. With a grantor trust, the value of the assets is attributed to you—and you would pay tax on them as if they were not in the trust.
Your irrevocable trust allows you the ability to live in your home even if the trust owns it. Not only will this method allow for a more effortless transfer of ownership after you pass away (especially when compared to a will), but you retain the ability to live in your house.
Instead of losing control over assets, our clients often find that they have more control; because the trust owns the asset on paper, the grantor can state what happens to that asset once the grantor passes away, regardless of the form the asset takes. For example, If your trust owns a vacation house, and the grantor has designated the house to pass to the grantor’s daughter upon the grantors death, the value of the house still would go to the daughter even if the house was sold right before the grantor died.
Instead of getting hung up on whether you’ll “lose control”, consider some valuable advantages of an irrevocable grantor trust: asset and property protection. If it is written and funded correctly, an irrevocable grantor trust adds a layer of protection between your assets and outside parties who wish to claim it.
Law Office of Alexander Sherwood Keenan
An irrevocable grantor trust is a powerful tool. But it is only as strong as the people who create it. To take full advantage of this trust, contact the Law Office of Alexander Sherwood Keenan. For more information about estate planning, we also offer free workshops. We look forward to meeting you.