Creating a will or trust is a major decision that many individuals in Indiana make at least once in their lives. With an irrevocable trust, you will no longer own the assets or funds you are designating once you sign the trust itself, making it a slightly different type of instrument for families and beneficiaries to consider.
What is an irrevocable trust?
Part of the estate planning process is determining whether a will or trust is the right choice for you. An irrevocable trust does not require probate or a lengthy legal process in order to complete the transfer of finances and/or assets to beneficiaries named in the trust.
With a standard will, individuals have more public access to the information it contains, which is why irrevocable trusts are a more private alternative.
Additionally, an irrevocable trust can also include funding up to $15,000 annually, which is not added to the overall estate after the death of the trustor. There is no incurred gift tax with an irrevocable trust up to $15,000 each year.
Types of irrevocable trusts
When you begin estate planning, familiarize yourself with the various types of irrevocable trusts, such as:
• Living trust. A living trust is created while an individual is alive and well and provides a complete walkthrough of how the trust should be executed upon his or her passing
• Testamentary trust. A testamentary trust is funded and created after the death of an individual. The trust is often executed and carried out following the terms that were documented in the individual’s original will.
While irrevocable trusts are optimal for those seeking structure and to finalize plans regarding their estates, it is important to keep in mind that irrevocable trusts are not flexible and do not provide control over assets once you have signed them away. Becoming familiar with wills and irrevocable trusts can help you determine which path is right for you and your loved ones.