(757) 552-6055Irrevocable Trust Agreements are generally established by individuals seeking to transfer assets out of their individual names and to ownership by an Irrevocable Trust for a myriad of reasons. For example, those reasons may be for income tax planning purposes; to hold funds for the benefit of certain beneficiaries (such as minor children or children with spendthrift tendencies); to hold title to vacation homes; and for estate tax planning purposes (such as holding a life insurance policy). There are basically four reasons to establish and make gifts to an Irrevocable Trust:
- Provide an economic benefit to a particular beneficiary
- Decrease the income tax burden to the person establishing the trust
- Transfer income-producing assets to a beneficiary for the purpose of utilizing the beneficiary’s lower income tax rate
- Decrease the amount of estate taxes that will otherwise be paid by the individual’s estate had the individual not gifted the asset to a beneficiary
Once an individual executes an Irrevocable Trust and transfers assets to it, he/she irrevocably parts with ownership and control of the assets. Only in very limited circumstances may the donor “undo” the transaction. In the great majority of cases, in order to modify or terminate an Irrevocable Trust, the donor must petition the appropriate Court and establish “good cause” for the modification or termination. However, in limited instances, the Trustee of an Irrevocable Trust and the beneficiaries of the Trust may enter into an agreement authorizing the change without the necessity of going to court.
Irrevocable Trusts are complicated estate planning documents subject to their own rules and regulations. It is important that you consult with a knowledgeable trusts and estates lawyer at Poole Brooke Plumlee PC prior to attempting to change an Irrevocable Trust.
