You’re thinking of setting up an irrevocable trust for your heirs. You’re interested in a multitude of benefits, from the tax advantages — which you do not get with a revocable trust — to the control it gives you over how your heirs get and use their money.
These trusts can be incredibly helpful. A trust is created with your specific situation in mind, so you know that it’s a flexible tool to give you control over your assets. You can save on taxes, make your wishes known, prevent future financial catastrophes and ensure that your plans for your wealth are followed.
If you choose to do this, however, you have to be very, very sure that the trust is set up exactly how you want it to be — and how you will want it to be in the future. You may never get to change or alter it again. If you make a rash decision, you are stuck with it.
That’s not to say that changes can never be made. They can. But the process is complex and everyone involved with the trust has to agree.
For instance, if the trust contains $150,000 that is supposed to go to your adult nephew, but then you decide to revamp your estate plan to leave all of the money directly to your children, you have to get your nephew’s approval to make that change. If he wants to keep the money, there may be little you can do to prevent it, even though you still think of it as “your” money. It’s not. It belongs to the trust.
This should not stop you from creating a trust if it’s the best option for your family, but it does show you why it’s so important to carefully consider all of your legal options.
Source: U.S. News & World Report, “How to Choose Between a Revocable and Irrevocable Trust,” Joanne Cleaver, accessed April 18, 2018