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An irrevocable trust is a type of trust that cannot be modified or amended. Once the trust has been drafted and finalized, no part of the trust document may be changed. Due to its rigidness, one may have difficulty in handling the trust and may have many questions about it. Answered below are some of the commonly asked questions about irrevocable trusts by the Experts.
It may not be possible for a beneficiary to use the money from an irrevocable trust without informing either the creator of the trust or the trustee. The individual will have to inform the trustee about it. The trustee may have the responsibility of managing the funds of the trust and may distribute the money according to the terms and conditions of the trust.
An irrevocable trust in most situations may provide asset protection.
It may be possible for an irrevocable trust to avoid paying taxes. This may be done by establishing a deferred variable annuity within the trust. This will help the trust to avoid income tax on the annuity till it is distributed.
The withdrawal of a gift from an irrevocable trust may not have any affect on the trust at all. The only affect, if at all, may be on the beneficiary if he/she does not withdraw the gift in a specific period of time. If the gift is not withdrawn in the given period of time, the beneficiary may lose the right to withdraw it at a later date.
If the trustee ill treats the creator of the trust, a person may sue the trustee in probate court for fiduciary irresponsibility. The individual may request the court to appoint a new trustee.
Whether an irrevocable trust may purchase common stock or not will depend on what is given in the trust document. In many situations, the trust may give the trustee the right to invest money in any legal way. On the other hand, some trusts may not allow trustees to invest or may allow only certain types of investments. One may have to look at the provisions of the trust document to see if the trust can invest in common stock or not.
Creators of a trust may be able to live in a property that is placed in the trust. There is no rule that states that anything that is placed in a trust has to make a profit.
Setting up an irrevocable trust can sometimes be confusing and may lead to various questions. Since it cannot be changed once done, you must be very careful while creating the trust document. You may sometimes not know what needs to be added in the document and what can be left out. You may seek the help of an Expert in such situations. Asking an Expert can help you resolve many of the doubts you may have while creating an irrevocable trust.