Trying to decide which estate planning tools will work best for your estate can be difficult. Numerous options exist, and you may wonder whether some could even apply to your particular circumstances. True, not everyone needs to utilize every planning tool available, but it is still wise to explore your options to find the best fit for your needs and goals.
For instance, you may not think that an irrevocable trust would play a part in your estate plan. However, you may not fully understand how it works or the benefits using this type of trust could have.
Irrevocable vs revocable
An irrevocable trust is different from a revocable trust because you cannot change the irrevocable trust after its creation. You can name a beneficiary to the trust, and that person is the only one who could make changes. Some people do not care for this lack of control, but it has its uses.
Benefits of irrevocable trusts
Like with other trusts, the assets you place into the irrevocable trust no longer count as part of your taxable estate. As a result, if the value of your estate could make it eligible for estate taxes, you may consider placing assets into an irrevocable trust in order to lessen the value of the overall estate and hopefully avoid taxation.
Additionally, if you have considerable debt, creditors cannot gain access to the assets in the trust. Essentially, the trust owns the assets, and because the trust does not owe the debt, creditors cannot make claims against it. Fortunately, if you die with outstanding debt but you transferred assets to the trust, those assets cannot be sold to pay off your remaining debts and remain protected for your heirs and beneficiaries.
Different types of trusts
In addition to irrevocable and revocable trusts acting as two separate trust options, other types also exist within those categories. You could look into an irrevocable marital trust, life insurance trust, charitable trust or many others. Depending on the exact details of your estate, you could likely find the trust that best suits your end goals.
Of course, if you do not know much about your available trust options, you may not know how this planning tool could benefit you and your loved ones. If that is the case, you would want to speak with a Massachusetts estate planning attorney who could help you understand the uses and benefits of irrevocable trusts.