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Irrevocable trusts are an important tool in many people's estate plan. They can be used to lock-in your estate tax exemption before it drops, keep appreciation on assets from inflating your taxable estate, protect assets from creditors, and even make you eligible for benefit programs like Medicaid.
A: An irrevocable trust is a trust, which, by its terms, cannot be modified, amended, or revoked. For tax purposes an irrevocable trust can be treated as a simple, complex, or grantor trust, depending on the powers listed in the trust instrument.
Once an irrevocable trust is established, the grantor cannot control or change the assets once they have been transferred into the trust without the beneficiary's permission. These assets can include a business, property, financial assets, or a life insurance policy.
Transfers to an irrevocable trust are generally subject to gift tax. This means that even though assets transferred to an irrevocable trust will not be subject to estate tax, they will generally be subject to gift tax.
The downside to irrevocable trusts is that you can't change them. And you can't act as your own trustee either. Once the trust is set up and the assets are transferred, you no longer have control over them.
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Asset protection from creditors. If you give money to a family member directly, that money could be lost to the recipient's carelessness, creditors, or divorce. Keeping the funds in a trust protects the assets for the future.
With an irrevocable trust, the transfer of assets is permanent. So once the trust is created and assets are transferred, they generally can't be taken out again. You can still act as the trustee but you'd be limited to withdrawing money only on an as-needed basis to cover necessary expenses.
Funding Your Irrevocable Trust REAL PROPERTY : Your residence and other real property are among the most appropriate assets to consider placing in your trust. ... LIFE INSURANCE POLICIES : ... ASSETS THAT HAVE APPRECIATED IN VALUE : ... CASH : ... SAVINGS BONDS : ... NON-QUALIFIED ANNUITIES : ... QUALIFIED RETIREMENT PLANS :
A gift in trust is a special legal and fiduciary arrangement that allows for an indirect bequest of assets to a beneficiary. The purpose of a gift in trust is to avoid the tax on gifts that exceed the annual gift tax exclusion limit. This type of trust is commonly used to transfer wealth to the next generation.
What assets can I transfer to an irrevocable trust? Frankly, just about any asset can be transferred to an irrevocable trust, assuming the grantor is willing to give it away. This includes cash, stock portfolios, real estate, life insurance policies, and business interests.

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