Irrevocable trusts can support various goals
While estate planning goals vary widely among people in California, irrevocable trusts can adapt to many uses. In general, an irrevocable trust holds property for another party's benefit and cannot be altered once established.
One form establishes ownership of a life insurance policy. Upon a person's passing, the death benefit is passed into the trust, which keeps the funds separate from the estate and could reduce taxes. Some estate holders choose to create a charitable trust, which assigns assets left after death to a charitable institution. This approach allows an estate holder to receive payments from the trust while alive and gain an income tax deduction for the charitable donation.
Irrevocable trusts may also extend across multiple generations. Known as dynasty trusts, they aim to limit estate taxes while preserving wealth for family beneficiaries for many years into the future. These legal tools can also exercise careful control of asset distributions, especially for a special needs person. Payments from a special needs trust can supplement a disabled person's income while avoiding disqualification for vital government support programs.
Because of the finality of irrevocable trusts, it may be wise to consult with an estate planning attorney before creating one. After the estate holder describes goals about passing on assets to family members or other institutions, the lawyer could provide options for achieving specific goals like limiting tax exposure or protecting assets from heirs' creditors. Once the legal angles have been explored and the client makes decisions, an attorney could draw up the paperwork for each element of the plan. Guidance could also be given on issues such as choosing an executor for a will or a trustee for a trust.