To create an irrevocable trust, the grantor must draft the trust's terms and conditions, identify the beneficiaries, transfer property to the trust, and register it with the appropriate tax authorities. The grantor must also name a trustee — the person who will have control over and administer the trust. A person who is the grantor cannot also be the trustee on his own irrevocable trust. The grantor has total control over all the details of the trust while it is being set up, including exactly what will be given to each beneficiary and when. Once the trust is created, the grantor gives up all control of the assets.
Estate planning is serious business, and establishing an irrevocable trust is a complex piece of that process. This is actually a form of protection for those with assets, since an irrevocable trust cannot be changed or reversed without the involvement and consent of the beneficiary. By creating an irrevocable trust, the grantor permanently transfers his assets to a separate entity — the trust.
The purpose of creating this kind of trust is usually to alleviate tax consequences, so it is important that it is created correctly. If it is done right, upon the grantor's death, the trust assets will be distributed without the costs and delays of probate. A well-written trust will not result in tax or financial aid consequences for beneficiaries, and will not cause its assets to become vulnerable if a beneficiary is sued, involved in a divorce, or has other liability problems. Irrevocable trusts are often designed to be the beneficiaries of insurance policies. They are also used to manage money given to minors or charities.
Irrevocable trust forms can be found on the Internet, but because of the nature of the trust, it should not be created without the help of an experienced legal professional. These trusts allow the grantor to sidestep some of the estate and income tax ramifications. If it is done incorrectly, it could result in fines or tax penalties, which would not meet the trusts' intended purposes. In the United States, there are local, state, and county laws that may impact the documentation needed in setting up an irrevocable trust. Grantors should be sure that the legal professional they hire is licensed in their state and has solid recommendations by trusted sources.
