If you’re like many Americans, you may not have worked out all the details of your estate and how you want it to be handled, including whether or not to use an Irrevocable Trust. A 2021 Gallup poll found that only 33 percent of Americans have a will, but there are many other ways to plan for the future.
Irrevocable trusts are valuable tools for estate planning and protecting your assets. But what does it take to administer and manage an irrevocable trust, and who should do it? In this article, we will look at what an irrevocable trust is, what the benefits are of an irrevocable trust and why you should choose Independent Trust Company to become part of your family for our trust administration services.
First, it’s important to know the definition of “trust” in general terms. A trust is a legal relationship that arranges the management, ownership and distribution of property. There are three key figures involved in a trust. The person who places the property in the trust is the grantor; the individual or organization that oversees the trust is called the trustee; anyone who benefits from the trust is a beneficiary and beneficiary entitlements can be very different, even under the same trust.
When selecting a trustee, you want someone who will make strong, fair and independent decisions on behalf of the trust. Whoever you choose as trustee must understand and be able to document the process they use to determine what is in the best interests of the trust’s beneficiaries. Good trustees do all that while cataloging, monitoring and protecting the trust assets. But it doesn’t stop there. Trustees also have a duty to make a trust’s assets productive. Some additional duties include but are not limited to:
The purpose of an irrevocable trust is to limit or totally prevent the terms of a trust from being amended, modified or terminated. Once the grantor has effectively transferred all ownership of their assets into the trust, they have legally terminated any ownership rights they previously had in the assets of the trust.
Occasionally, under certain specific circumstances some terms of an Irrevocable trust can be modified or updated by going to court or if a trust document is written and governed by the laws of a state that supports modification of the terms of an irrevocable trust. However, it is important to understand that most irrevocable trusts are made irrevocable with very specific intentions. For example, irrevocable trusts can be set up to minimize estate tax liability, protect assets, assure that beneficiaries cannot be eliminated from an estate plan and much, much more.
Anyone looking to protect their assets can make use of irrevocable trusts. However, they are especially useful to people who work in fields that may make them more vulnerable to lawsuits, like doctors or lawyers. After assets are transferred to an irrevocable trust, they are owned by the trust on behalf of the designated beneficiaries. Every state is different but, in some states, after a period of time has passed since a trust becomes irrevocable, any asset owned by an irrevocable trust can be safe from legal judgments against or creditors of the trust’s grantor or beneficiaries.
Sometimes merging an irrevocable trust with another trust or going through a process called decanting can provide additional benefit, clarity and even flexibility in the operation of an irrevocable trust through modernization of terms. While these techniques can be complicated, the clarity they can provide can give all parties access to tools that can help ensure that an irrevocable trust is managed more effectively.
1. Living Trusts. An irrevocable living trust is originated by an individual while they are alive. Some living trust examples are:
Independent Trust Company has a team of experts ready to answer your questions and help you manage your irrevocable trust. We are well versed in the technical aspects of trust management, but we also believe that trusts are about people. We build lasting relationships with our clients and work to serve as an extension of your family. We also offer advisor services for those needing assistance. Reach out to us today to find out more about irrevocable trusts and why Independent Trust Company is the right solution for your trust administration services.