A Trust That Will Not Change

An irrevocable trust is a trust created, generally speaking, during the lifetime of an individual that cannot be changed, modified or terminated by that individual. The individual is commonly called the grantor, which is another name for someone who creates and funds his or her own trust. The grantor, upon funding the trust, actually transfers legal title to the property placed into the trust to the trustee. The trustee is the individual or party responsible for administering the property for the benefit of the trust’s beneficiary. In other words, the trustee is responsible for taking care of the property transferred to the trust for the individual beneficiaries the trust was set up to benefit.

To use an example, a trust is similar in many respects to a can into which an individual (grantor) may place all types of personal assets. The can holds and protects the assets while the named trustee has control over the assets. If the trust were set up as a revocable (or living) trust the grantor would be able to lift the cover of the can and have the ability to retrieve the assets that were placed inside. But, if the grantor were to set up the can without the ability to remove the cover and, hence, loses the ability to retrieve the assets inside, the trust is an irrevocable trust.

• Increase the control of his or her assets beyond his or her death,
• Protect the assets from the claims of creditors,
• Provide for individuals, in complete privacy, that may not be family members,
• Minimize the expenses and delays associated with probate,
• Provide liquidity to pay taxes and expenses at death in order to ensure family assets are passed to heirs,
• Allow assets to be held for and income given to more than one beneficiary and/or several generations of beneficiaries, and
• Minimize federal estate and state death taxes.

Not everyone will find setting up an irrevocable trust the answer to his or her estate planning dilemma. An irrevocable trust should not be used just because it is a popular tool or even because it may have saved a sizeable amount of estate taxes for someone else. Most would agree that giving up the ability to recover one’s own property or the ability to change the terms of one’s trust to be a pretty high stakes game. And he or she would be right. The use of an irrevocable trust within an individual’s estate plan should be considered when it would help accomplish a number of different objectives that are very important to that individual.

Of course, this brief article is no substitute for careful consideration of all of the advantages and disadvantages of an irrevocable trust in light of your unique personal circumstances. Before implementing any significant estate planning strategy, consult with your financial advisor, attorney or tax professional as appropriate.

Lynn Siewert is the Principal of Advanced Corporate Planning and Branch Manager of the Vancouver, Washington Office of Supervisory Jurisdiction, Licensed through First Allied Securities, Inc. Member NASD/SIPC