Why would I want an irrevocable trust?
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Let’s take a quick look at the differences of a revocable and irrevocable trust:
- Revocable Trust/Living Trust – As the name states a “revocable trust” or a revocable living trust can be revoked, amended, redrafted or altered. As long as the grantor is alive the revocable trust can be modified.
- Irrevocable Trust – As the name states an “irrevocable trust” cannot be revoked, amended, redrafted, terminated or altered, unless under judicial modification or a court involved mutual agreement to the trust has been given.
Who would need a irrevocable trust?
Another spectacular question! Lets use a growing dentists office or a medical professional as our example here. If you as a dentist or medical professional help people to stay healthy there is always a small chance that something may go wrong. When something goes wrong you are liable for this problem. If you are sued than your assets and quite possibly your business may be in jeopardy. A way to possibly protect your growing business is to set up an irrevocable trust that is owned by the business rather than one single person owning this business and its assets.
Although we all hope that our business will grow and prosper without any issues, as you can see, with the many scenarios that may be playing in your head right now, you can understand why this type of asset protection may be the key to grow and keep your business healthy itself.
Ensure that all of your assets are mentioned in the trust or have your attorney set up special provisions specific to any property or income that may be added to the trust in the future.
Once the trust has been created, ensure that everything else that you do in the future has considerations for the trust. What we mean by this is if you purchase another business, grow your business, buy another house, etc. than you should be sure to include this into your trust. Sometimes we may recommended reanalyzing your irrevocable trust every 6, 12 or 24 months depending on your specific scenario.
Once you’ve transferred your assets and business into your irrevocable trust you personally no longer own those assets or business.
The trust now owns all of this. You alone cannot change the trust now without permission of the beneficiary.
When having your attorney create an irrevocable trust it reduces or quite possibly eliminates the estate taxes that would typically be due when someone passes and the property or assets to a beneficiary. The reason why an irrevocable trust is something to consider is that the assets are now included in the “grantors” irrevocable trust estate.
Another great example of this is when a person purchases life insurance under the irrevocable trust than the trust holds onto this money after the purchaser has passed away without any taxes.
This sounds all good and well, but what about creditors? An Irrevocable trust will help protect your business from creditors, however there are exceptions to this rule. When we say “exceptions” this is why it is always a good idea to speak to a qualified attorney who can help guide you specific to your own situation. The benefit of setting up an irrevocable trust is for you to protect your business, but you must set the trust account up prior to any creditors trying to collect from you or your beneficiary. If the creditor has already started to try to collect your assets and you do not have an irrevocable trust established than speaking to an attorney right away may help because they could find ways of protecting you or your businesses assets.
When its time to consider what is best for your business, how to protect your businesses assets or you just have questions about your particular assets you’ve accumulated contact the experienced attorneys at the Wesbrooks Law Firm. We offer FREE consultations to discuss your options and to help you start thinking about the future.