An irrevocable trust is one in which the grantor gives up all rights of ownership. If the grantor can bear to part with the trust property, an irrevocable trust offers a number of advantages as a financial and estate-planning tool.
Properly structured, an irrevocable trust provides the advantages and protection of any trust in the management and distribution of income and property. In addition, an irrevocable trust can save income taxes and estate taxes, as well as avoid probate. The specific advantages differ by the specific use to which the trust is put; they will be discussed in later screens.
The greatest disadvantage of an irrevocable trust is that the grantor must make an irrevocable transfer of money or property to the trust and surrender all rights over the trust income or property. Also, transfers to the trust will be subject to gift taxes to the extent gifts exceed the grantor's annual gift tax exclusion or do not qualify as gifts of present interests. A final disadvantage is that a portion of the benefit of the trust will be offset by the cost of creating and maintaining the trust.
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