Let’s talk about money and wealth this time… Because, he who only feeds his spirit, will starve to death. Money is needed, as well.
How Irrevocable Trusts Work
Let’s discuss how irrevocable trusts work. First, an irrevocable trust involves three individuals: the grantor, a trustee, and a beneficiary. The grantor creates the trust and places assets into it. Upon the grantor’s death, the trustee is in charge of administering the trust. This means that he or she is responsible for distributing the assets in the trust according to the grantor’s wishes. The trustee has an important job, as he or she must protect the assets.
The beneficiary is the person who receives benefits from the assets. Assets placed into the trusts are considered gifts and cannot be removed at a later date. The grantor, however, does have the ability to create the exact terms and rules that others must follow.
For example, the grantor may specify that the money placed in an irrevocable trust gets used for a specific purpose, such as for college or a wedding. How They’re UsedIrrevocable trusts have many uses for those looking for a good asset protection and estate planning tool.
Some benefits include the following:
- Protecting assets from judges and creditors.
- Removing taxable assets from the estate so that the grantor can take advantage of estate tax exemptions.
- Removing appreciating assets from the estate and allowing them to take on a better value so that beneficiaries don’t have to pay so much in taxes
- Gifting a home to children with less tax implicationsGifting assets while being able to retain the income they generate
- Preventing misuse by greedy beneficiaries, since the assets can be held in the trust and distributed per the grantor’s wishes