You should have an Irrevocable Trust for the protection of your assets!
An Irrevocable Trust is a trust that you generally cannot revoke or change. You may want to set up an Irrevocable Trust to reduce estate taxes, or even protect your property against Divorces, Lawsuits and/or Creditors. Here’s how Irrevocable Trusts are structured, and the benefits they can provide…
An Irrevocable Trust typically involves three key players: the Grantor, the Trustee and the Beneficiary/Beneficiaries. The Grantor is the person who creates the trust, the Trustee administers the trust and is the Beneficiary or Beneficiaries are entitled to receive the benefit of the trust and any distributions the trust states. These trusts are established by a Trust agreement, which is a writing that sets forth the individuals filling the three key roles described above, as well as describes how the trust property will be managed and distributed. The trust agreement, which is generally drafted by an attorney, is then precisely executed in a manner that is governed by state law.
Assets owned by an Irrevocable Trust generally are EXCLUDED from the Grantor’s taxable estate. This is extremely important in the context of large estates, which may trigger the dreaded federal estate tax (40% on all assets above 5.49M per individual in 2017). There is also a Connecticut estate tax that applies to assets north of 2M per individual. Excluding the value of assets held in an Irrevocable Trust has the potential to save your family a substantial tax liability upon your death.
Additionally, customized distribution instructions are available for trust Beneficiaries. You may not want a child or a loved one to receive all the property that they are inheriting at once (an “outright” distribution). As an alternative, trusts provide an opportunity for the Trustee to oversee and manage all trust property. The assets are still earmarked for the Beneficiary, but to the extent that the property remains safeguarded in trust, the property enjoys significant protection against divorces, lawsuits and creditor attacks. Appointing an independent Trustee is also an effective way to ensure that the Beneficiary can’t directly access the money, which could lead to inappropriate spending decisions that you wouldn’t have approved of!
Overall, the time and money that you spend on the services of an Estate Planning attorney to assist you with your Irrevocable Trust will absolutely pay off in the long-run. These trusts protect your hard-earned money and other assets for those you care about the most, and can also greatly reduce your estate’s exposure to estate taxes.