An irrevocable trust is a great tool to allow a family to protect its wealth. When setting up an irrevocable trust, an individual will convey ownership of a property to a trust, and no longer have control of that property. Typically this is done as a gift to the trust. The trust set up will serve as its own taxable entity and pay taxes based on its accumulated income. If income is distributed, a trust can usually receive a tax deduction for this distributed income. Some examples of assets that can be held within an irrevocable trust are a life insurance policy, a business, investment assets and cash.
Once the property is conveyed to an irrevocable trust, such services as reverse mortgage are no longer available for the property. This type of trust is generally used in advanced estate planning where such mortgages will not be needed. Irrevocable trusts cannot be changed by the grantor without granted permission from the beneficiary.
Once an individual sets up the irrevocable trust, they relinquish their legal rights to the included property and assets. With proper legal advice, you can have an irrevocable trust drawn up so that it won’t be taxed separately on its income during the trust maker’s lifetime.
