|
The Irrevocable Trusts - Even Though It Is Irrevocable, It Can Be Flexible! |
 |
 |
The use of an irrevocable trust may allow you and your family to reduce the estate taxes which would otherwise be payable on your death or on the death of your spouse. You accomplish this by removing assets from your estate and placing them in the irrevocable trust while you are living. To achieve the desired outcome you must forego several explicit controls over the disposition of the property and operation of the trust which are available to you in a revocable trust. Nevertheless, a well-drafted irrevocable trust will allow you to retain certain permitted controls which will provide flexibility.
For example, you may name your spouse as a lifetime beneficiary of the trust along with your children (or grandchildren). This may provide a means of recovery of some of the property of the trust depending upon your family’s financial circumstances. You may give your spouse a limited power to change the way that the trust property is distributed to children or grandchildren. If you want to have trusts for children or grandchildren, they may be given the right to determine how property is distributed from their trusts. An independent trustee, if appointed, can be given the power to amend the trust to change the way that property is distributed or the manner in which the trust will be administered. Moreover, an independent trustee can be given the power to terminate the trust under certain circumstances.
Some of the flexibility provisions featured in this article are not available in certain specialized irrevocable trusts, such as Charitable Remainder Trusts , Grantor Retained Annuity Trusts and other trusts. However, they are available for other types of irrevocable trusts such as Life Insurance Trusts . The tax rules which govern irrevocable trusts are complex, so care in the planning and drafting of such trusts is essential. The irrevocable trust is seldom the sole component of a good estate plan. Instead, it should be viewed as a special estate and gift tax tool which is coordinated with your revocable trust or will.
Property which you transfer to an irrevocable trust is treated as a gift under the gift tax system. You may be able to take advantage of annual exclusion gifting.
This article is intended to acquaint the reader with some general principles which govern irrevocable trusts and is not intended to convey legal advice with respect to the reader’s specific circumstances. Specific planning opportunities which employ irrevocable trusts require detailed legal analysis and drafting techniques and the reader is therefore encouraged to call one of the following attorneys who practice in the Trusts and Estates group at Quinlivan & Hughes, P.A. 320-251-1414.
Kevin A. Spellacy
John H. Wenker
Robert P. Cunningham
W. Benjamin Winger
Bradley W. Hanson
i. The articles referred to in this article are: Revocable Trust, Also Known As A Living Trust
ii. Charitable Remainder Trusts
iii. Grantor Retained Annuity Trust (GRAT)
iv. Life Insurance Trusts - Life Insurance Benefits Free of Estate Tax
v. Irrevocable Trusts - Making Gifts To Your Trust Without Having To Pay Gift Tax
|
