There are two primary types of living trusts; revocable and irrevocable. Many people will instinctively favor the revocable version since it gives the opportunity to update and change things in the future.
An irrevocable trust is a trust that can’t be amended, modified or terminated. The grantor cannot change the written terms of an irrevocable trust after transferring assets into the trust. This is because the assets now belong to the trust and this has removed the grantor’s ownership on those listed assets. There are some good reasons to consider using an irrevocable trust rather than a revocable trust. The primary difference is that the assets could remain in the grantor’s estate in revocable trust, but formally move out of the estate in an irrevocable trust.
With an irrevocable trust, you also get potential benefits, such as avoiding capital gains taxes and asset protection. Bear in mind that transferring assets through an irrevocable trust could generate gift taxes, but there are ways to move assets in the irrevocable trust in a way that they will generate capital gains taxes. For asset protection planning purposes, an irrevocable trust moves the assets from the trust maker’s hands so that it is formally seen that the grantor is no longer the owner of them.
An independent trustee, instead, makes all the decisions about investments on behalf of all of the trustees which could or could not include the grantor. Schedule a time to speak over the phone with an experienced estate planning attorney in Pasadena today.