Trusts are a legal arrangement that allow a person to provide for a beneficiary. Ohio residents might wish to know some of the reasons one might establish an irrevocable trust as this type of trust is permanent, and a grantor cannot remove assets from it or in most cases make any changes to the document.
One kind of irrevocable trust is called a qualified personal residence trust. This trust is set up and funded while a benefactor is still alive and might be used for real estate. This reduces the asset's taxable value. Similarly, a grantor retained annuity trust may prevent heirs from paying an estate tax.
Testamentary trusts are made and funded after a testator dies using the terms stated in the will. This does allow the testator to modify terms while alive but becomes irrevocable when he or she passes away. All trusts essentially become irrevocable when those who have the right to edit the terms are deceased.
An irrevocable trust could be useful when one wants to protect assets for heirs from lawsuits and creditors since the assets in this trust belong to the trust and not the grantor. This also means that assets in a irrevocable trust are usually not part of one's estate, which lowers the amount of an estate and might allow heirs to pay less or no estate tax. A revocable trust does belong to the grantor, so it does not offer the same benefits.
While an irrevocable trust has appealing attributes that a revocable trust does not, the former offers much less freedom as all decisions are final once assets are part of a trust. Both types of trusts could be useful to avoid probate. One might need to consult an attorney when making estate planning decisions to learn about options and ensure that a trust is established correctly.