Before we start, it must be highlighted that this blog entry is only relevant to common law countries (i.e. England, USA, Australia, New Zealand, etc.) and to countries which recognize the legal institution of trusts.
If you think about devising a plan for how your estate should be handled, then you probably wonder whether you should just write a Will or set up a trust as well. While there are some definite benefits to setting up a trust, the types of trusts available – namely, revocable versus irrevocable trust – tend to be confusing.
While a revocable trust allows you to make changes whenever you want, an irrevocable trust remains in place the moment it is created. Below, we review some of the pros and cons associated with irrevocable trusts.
Irrevocable Trusts: A Primer Pros and Cons of Irrevocable Trusts
Irrevocable Trusts: A Primer
There are two types of irrevocable trusts: the irrevocable living trust and the irrevocable testamentary trust. In the former, you create and fund the trust in your lifetime. In the latter, the trust will not be funded until your death.
Some examples of irrevocable living trusts are life insurance trusts, spousal lifetime access trusts and charitable remainder trusts. Examples of irrevocable testamentary trusts are those that are set up in a Will and that will acquire some or all of the assets in your estate.
Pros and Cons of Irrevocable Trusts
Some of the pros are:
Assets placed into an irrevocable trust might not be subject to estate tax, making it a great option for people with a large estate.
You can dictate conditions for how your estate should be distributed, thereby eliminating any mishandling at the time of your passing.
A trust protects your estate from legal claims related to professional liability – an important benefit for lawyers, doctors and other highly litigious fields.
Cons may include:
Once you move your assets into an irrevocable trust, you lose control of them. You will need to get permission from beneficiaries before making any change.
If you suddenly begin experiencing financial hardship, you will not be able to change the income distribution you allotted in your irrevocable trust.
If your priorities, goals or finances change, you will not be able to make any amendment to the trust.
Irrespective of the type of trust you consider setting up, writing your Will is the very first step, and it’s an important one. But that’s not enough. In the digital age, the next step is to store your Will online. Otherwise, what happens if nobody is able to find your Will in a timely manner? liteWill is the only registration platform that is available globally and that provides the option to store your Will online. ‘A Will that is not online is like a Will that does not exist’.
This portion of the website is for information only. The statements and opinions are the expression of their author, not of liteWill, and have not been evaluated for accuracy, completeness or changes in the law. Information contained in this article is not a substitute for tax or legal advice.
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