While revocable trusts, like “family trusts” or “living trusts,” can be valuable for estate planning because they can be revoked or changed at any time, they provide no asset protection against lawsuits or liability risks, at least as long as the grantor (the person who created the trust) is alive.
For maximum flexibility, a revocable trust is best because you can adjust it as many times as you like while you're alive. In general, irrevocable trusts are best for those who have extensive assets, since these trusts offer greater tax benefits and asset protection.
The downside to irrevocable trusts is that you can't change them. And you can't act as your own trustee either. Once the trust is set up and the assets are transferred, you no longer have control over them.
One type of trust that will protect your assets from your creditors is called an irrevocable trust. Once you establish an irrevocable trust, you no longer legally own the assets you used to fund it and can no longer control how those assets are distributed.
Revocable, or living, trusts can be modified after they are created. Revocable trusts are easier to set up than irrevocable trusts. Irrevocable trusts cannot be modified after they are created, or at least they are very difficult to modify. Irrevocable trusts offer tax-shelter benefits that revocable trusts do not.
If you want to ensure continued support for someone, or protect assets into the future, an irrevocable trust is a way to set up an extended payment schedule or protect property from creditors.
The only three times you might want to consider creating an irrevocable trust is when you want to (1) minimize estate taxes, (2) become eligible for government programs, or (3) protect your assets from your creditors. If none of these situations applies, you should not have an irrevocable trust.
This rule generally prohibits the IRS from levying any assets that you placed into an irrevocable trust because you have relinquished control of them. It is critical to your financial health that you consider the tax and legal obligations associated with trusts before committing your assets to a trust.
Here's a good rule of thumb: If you have a net worth of at least $100,000 and have a substantial amount of assets in real estate, or have very specific instructions on how and when you want your estate to be distributed among your heirs after you die, then a trust could be for you.
With your property in trust, you typically continue to live in your home and pay the trustees a nominal rent, until your transfer to residential care when that time comes. Placing the property in trust may also be a way of helping your surviving beneficiaries avoid inheritance tax liabilities.
"A family protection trust will be particularly good for couples who want to make sure their partner can keep living in the family home, but on the basis that their estate will eventually be passed on to their children."
Irrevocable trust refers to any trust where the grantor cannot change or end the trust after its creation. Grantors may choose a trust with such limitations to limit estate taxes or to shield assets from creditors.
One of the reasons for setting up a trust is to set aside property as separate from one's personal assets. One of the benefits of this is that assets which are held in a trust are protected from creditors, for example should the settlor become insolvent or be declared bankrupt.
Grantor—If you are the grantor of an irrevocable grantor trust, then you will need to pay the taxes due on trust income from your own assets—rather than from assets held in the trust—and to plan accordingly for this expense.
While there are many benefits to putting your home in a trust, there are also a few disadvantages. For one, establishing a trust is time-consuming and can be expensive. The person establishing the trust must file additional legal paperwork and pay corresponding legal fees.
With an irrevocable trust, the transfer of assets is permanent. So once the trust is created and assets are transferred, they generally can't be taken out again. You can still act as the trustee but you'd be limited to withdrawing money only on an as-needed basis to cover necessary expenses.
With that said, revocable trusts, irrevocable trusts, and asset protection trusts are among some of the most common types to consider. Not only that, but these trusts offer long-term benefits that can strengthen your estate plan and successfully protect your assets.
The four main types are living, testamentary, revocable and irrevocable trusts. However, there are further subcategories with a range of terms and potential benefits.
Putting assets into an Irrevocable Living Trust can be understood as giving the assets to someone else (the Trustees) to manage. In addition, you (the grantor) forfeit any rights to the control or management of the assets, including the right to sell, give away, invest, or otherwise manage the property in the Trust.
The grantor transfers all ownership of assets into the trust and legally removes all of their ownership rights to the assets and the trust. Living and testamentary trusts are two types of irrevocable trusts.
What assets can I transfer to an irrevocable trust? Frankly, just about any asset can be transferred to an irrevocable trust, assuming the grantor is willing to give it away. This includes cash, stock portfolios, real estate, life insurance policies, and business interests.