An irrevocable trust is a trust which, once set up, cannot be changed or canceled without first getting the permission of the beneficiary. The grantor may not withdraw contributions from the trust. There are certain tax advantages accruing when the trust is irrevocable. Using this type of trust a person is allowed to give away his or her assets or money even before death, which is not possible in the case of a revocable trust. Thus, an irrevocable trust is a trust that becomes permanent after being established and may not have changes made to it or be revoked once formed.
There arrangement must be set up per the grantor’s wishes. In establishing the arrangement for estate planning purposes, the goal of the trust would be to minimize federal estate tax. If passing on real estate or other property, the grantor will be giving away the property to the beneficiary permanently. This would mean that the grantor no longer owns the property and so it does not qualify as part of the total estate and no federal estate taxes need to be paid. In the event the grantor takes out a life insurance to pay for the federal estate taxes, this may then be the only asset of the trust and it would be possible for the policy to be separate from the grantor’s estate and not subject to taxation. Continue reading ‘Maximize Tax Benefits With an Irrevocable Trust’ »