Trusts allow the grantor in Pottstown, Pennsylvania, or trust creator, to hold assets legally for a beneficiary. One type of trust is an irrevocable trust, which means the grantor cannot change it without the beneficiary’s permission. Irrevocable trusts can be used in addition to a will, but they have pros and cons.
Types of irrevocable trusts
Two types of irrevocable trusts are a charitable reminder trust and charitable lead trust. A charitable reminder trust gives income to at least one beneficiary for a set time and leaves the rest to charity. A charitable lead trust works in re3verse by making charitable payments and pays the balance to the beneficiary at the end of the time period.
A grantor retained annuity trust pays income to the grantor for a set time using a percentage of asset value or interest. A qualified personal residence trust permits the grantor to place their residence in a trust and continue to live in it.
Pros and cons of irrevocable trusts
One con of irrevocable trusts is the grantor loses rights to the property upon creation of them. If unforeseen changes happen, the grantor may find it hard to adapt the trust to the situation. For example, if an adult child has proven irresponsible with money, it cannot be changed. Unlike a revocable trust, the grantor must assign a trustee and follow the specific trust rules.
One benefit of irresolvable trusts is they reduce tax obligations on the estate. Trusts help beneficiaries avoid the lengthy probate process, which often takes weeks. Irrevocable trusts are useful to protect assets for professions with a high risk of lawsuits or from ex-spouses and creditor.
Trusts are not just for the wealthy and make a great estate planning tool when the pros outweigh the cons. However, the grantor may benefit from hiring a lawyer to draft them.