Irrevocable living trust: An irrevocable trust allows you to permanently and irrevocably transfer your assets during your lifetime. After you transfer these assets, you have relinquished all control and interest in these assets. Your beneficiaries would benefit at Uncle Sam’s expense if you utilized an irrevocable trust to reduce your taxable estate before your death.
The main purposes of such trusts are:
- Property management.
- Avoid probate upon death.
- Shifting income tax burden to lower tax brackets.
- Reducing estate tax liability.
- Avoid gift tax on assets likely to appreciate.
Trusts, both revocable and irrevocable, specify how the grantor’s assets will be distributed after his death. Alternatively, the terms of a “living trust” go into effect while the grantor is still alive. This means that an irrevocable living trust goes into effect during the grantor’s lifetime, and cannot be revoked, altered, or terminated. One reason an irrevocable living trust may be used is to fund a beneficiary’s education while the grantor is still living.
Irrevocable trusts are the easier of the two to understand. After you place property into an irrevocable trust, you can’t retrieve the property. For all intents and purposes, that property now belongs to the trust, not to you!.
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