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Confident in your trustees? Irrevocable trusts may save you money

Gifting large assets to heirs and family members constitutes a generous decision. Perhaps you have saved thousands of dollars after selling a business or creating a product. You plan to allocate some money you have earned over time to loved ones, but you prefer to release the funds to your trustees after you pass. An irrevocable trust allows you to designate money in a permanent document.

Unlike a revocable trust, which allows you to make significant adjustments to your document at any time, an irrevocable trust finalizes all decisions immediately. 

Multiple benefits stem from the use of irrevocable trusts:

1) Protection of assets: When you place certain assets in an irrevocable trust fund, these assets no longer belong to you. Technically, your trustee owns your designated possessions, although they may not directly access them until your passing. Your funds act as frozen money, so creditors are unable to obtain retribution from these funds.

2) Tax exemptions: Designating money to an irrevocable trust may save you significant cash in taxes. Filing this type of trust excludes you from paying income tax on the money you enter the fund. Because your irrevocable trust carries its own tax identification, it is taxed as a separate entity.

3) Peace of mind: An irrevocable trust provides the opportunity to make specific, permanent decisions regarding your assets. Should a tragic event occur such as death or job loss, you know that your trustees’ funds stay safely in the trust and do not depreciate.

Because your decision to establish an irrevocable trust is permanent, it is essential to be confident in your choices. Deciding both on the designated trustees and the amount of funds to allocated them is key in the creation of an irrevocable trust. Determining trust details early may prove to be financially valuable in your situation.

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