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An irrevocable trust is a type of legal body established to keep and administer assets for the benefit of specified beneficiaries. Irrevocable refers to a trust that, once established, cannot be modified, canceled, or changed, unless under extremely specific situations.
An irrevocable trust's goals include ensuring that assets are transferred in accordance with the grantor's desires and providing asset protection and tax advantages. Assets are protected from creditors and other potential legal claims once they are transferred into the trust since they are no longer regarded as a part of the grantor's estate. The grantor's estate may pay less in taxes overall by holding assets in an irrevocable trust that may be free from estate taxes.
A variety of estate planning objectives can be achieved with the aid of an irrevocable trust, including ensuring that assets are distributed to beneficiaries in a secure and controlled manner or lowering the overall tax burden on an individual's estate. Other objectives include providing for the long-term care of a disabled or elderly family member.
It is significant to keep in mind that, once an irrevocable trust is created, the grantor forfeits control of the assets transferred to the trust. All trust-related decisions must be made legally, and the trustee is in charge of maintaining the trust and allocating its assets. For some people, this lack of control may be a drawback, but it is a price worth paying for the advantages that an irrevocable trust can offer.
