Are you worried about your estate plan if you suddenly pass away? Are your current measures on asset protection, effective?
Irrevocable trusts allow you to get these matters in order if you wish. However, there are several considerations that you need to take into account before doing so.
Keep reading to learn more about what to consider before creating irrevocable trusts and determine whether it’s the right option for you.
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Trustor’s Financial Status
Are there sufficient financial assets to cover expenses, or do monies need to be borrowed? It is also important to consider liquidity requirements. Will the trustor need access to the funds now or in the future, or will they keep them in the trust indefinitely?
It is important to think ahead and understand that income needs could change over time, so you must do inheritance planning with future expenses and needs in mind. Trustors should consider whether this is truly what they need and if it meets their larger financial planning goals.
Administration of Trust
One of the most important considerations when creating an irrevocable trust is how you will administer the trust. It includes selecting a trustee who is qualified and responsible enough to handle the administration of the trust assets according to the terms and conditions of the trust agreement.
There may be different trustee options depending on the trust agreement. Examples are a corporate trustee, a friend or family member, or even a professional fiduciary.
It will also depend on the type of trust, like slat trust. But what is a slat trust?
A slat trust is an irrevocable trust where you distribute assets to two entities: the surviving spouse during their lifetime and, after death, the children. This trust allows the surviving spouse to access the assets while alive. At the same time, the children access the remaining resources after the surviving spouse passes away.
Discussing these various options with an attorney is recommended before creating an irrevocable trust. As the trust will be binding and last for many years, it is crucial to ensure the trustee can manage the trust in a qualified, confident way.
Trustee’s Qualifications
Depending on your state, that might include necessary educational credentials, professional experience or training, or even residency requirements. Choose someone with a qualified fiduciary designation.
Someone with such credentials has achieved specialized training and experience. They will be invaluable assets in the role.
Tax Implications
An irrevocable trust is an essential consideration for individuals seeking to protect assets from taxation or avoid probate. An irrevocable trust can shield assets from estate taxes. It may also require more filing requirements and taxation of investment income.
Research the applicable laws and regulations to ensure that they align with an individual’s estate planning needs.
Create Irrevocable Trusts Today
Before creating irrevocable trusts, consider the potential tax and estate implications. Also, consider your current and future needs and goals. There is also a need for professional legal and tax advice.
With careful consideration, an irrevocable trust can provide many benefits. Speak to your tax or legal advisor for more information.
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