When you are estate planning, one of your goals is to make sure your assets go to the intended recipients. A simple way to do this is to set up an irrevocable trust. It is important to know that once you set up an irrevocable trust, you may not make changes to the trust unless you have the permission of the beneficiary. Check out four reasons an irrevocable trust belongs in your estate plan.
1. You Can Attach Guidelines Concerning How the Money Is Distributed to Your Heirs
You have worked hard to build your nest egg; it only makes sense that you want the money to be used as wisely as possible. When leaving money to friends and family who aren't as financially responsible, an irrevocable trust is one way to make sure it lasts.
With an irrevocable trust, you are able to specify how and when you want your heir to use the money. For example, you might dictate that they get a certain amount from ages 18–25, including an additional stipend for college expenses.
Or you may only want the money used for certain events. You could specify that the funds may only be used for paying expenses associated with achieving a higher education or purchasing property.
2. Trusts Are Tax-Friendly Estate Planning Tools
Once you place an investment into an irrevocable trust, it no longer belongs to you. Since you no longer have any legal right to the money, you do not have to pay taxes on the investment's earnings.
An irrevocable trust can also ensure that your nest egg is exempt from gift and estate taxes. You've worked hard for your money and want to lose as little as possible to tax obligations.
3. Multiple Types of Investments May Go into the Trust
There are a slew of investments that you can put inside of the trust. Some common options include investments, cash accounts, pieces of property, and business interests.
4. You Can Start Distributing the Money When You Are Still Alive
You may want to see how your nest egg helps your heirs while you are still alive. A certain type of trust, known as a living irrevocable trust, enables you to do just that. Distributions from the trust may begin while you are still alive, letting you see firsthand how your investments are helping your heirs.
Keep your nest egg intact with proper estate planning. Estate planning lets you decrease your tax obligations, bypass fees, and passes your money to your desired beneficiaries. An irrevocable trust is a top alternative to include in your estate plans. For more information, contact a company that specializes in trust management.Share