An irrevocable trust allows the creator, called a grantor, a way to ensure that his or her possessions and insurance policies are distributed in a desired manner after his or her death. One major benefit of an irrevocable trust is that the beneficiaries will not be encumbered with the grantor’s estate needing to go through probate prior to distribution. The one major drawback is that once the grantor legally gives up ownership on all of the items placed into the trust, the trust cannot be changed. There are several steps recommended when someone wants to establish a legally binding irrevocable trust.
A consultation with a financial planner or a trust lawyer can help a grantor determine and define:
–What items to place into an irrevocable trust. Assets placed into a trust generally have large monetary values, but can also contain items of sentimental values to be given to specific persons. The types of items that can be placed in an irrevocable trust are endless and can include properties, life insurance policies, family heirlooms, businesses, cash, stocks, bonds, artwork, watercraft, airplanes, and expensive automobiles.
–The best trustee(s) to manage the trust. Since the trustee(s) will have direct access to the trust assets; the grantor must have confidence that the selected establishment or individuals will manage and execute the trust fund as established.
–The list of all beneficiaries. Beneficiaries are not limited to relatives; the grantor may bequeath items to friends, business associates, employees, public institutions, strangers and any number of charities.
–How the assets will be distributed and on what timetable. The grantor may want to ensure that certain assets are not immediately available for distribution and will remain in the trust for the benefit of future generations.
–A trust lawyer will construct the required trust fund documents that will include a list of all trust items; a list of the beneficiaries; the names of trustees; how the fund will be managed; and how the assets will be distributed.
–When selecting a trustee, the grantor can name a trustee successor in case the original trustee cannot perform his or her required duties. The trustee manages the trust fund and provides status reports.
–The grantor will legally transfer ownership of all trust fund assets to the trustee. Depending on the type of assets in the fund, the trustee may need to establish several accounts for the trust.