Looking for new ways to create tax-free financial growth? Building your estate plan around an irrevocable trust to protect your assets offers you additional advantages that you may not be aware of. In this post, we’re going to be covering what an irrevocable trust is, and the advantages that come with being charitable in your estate planning process.

What is an irrevocable trust?

An irrevocable trust is a form of estate planning that places your assets in the care of a neutral entity (the trust) that holds it on your behalf. There are two main types of trusts: Irrevocable vs. revocable. Irrevocable trusts, which we’ll be covering today, are far more restrictive and permanent. In contrast to a revocable trust, you will be unable to remove your assets from the possession of the trust, excluding extenuating circumstances. It offers inherent benefits, such as protection from excessive taxation on your assets and pursuit of your held assets by delinquent creditors.

How does charitable planning work with an irrevocable trust?

You can set up a charitable remainder trust (either a CRAT for a fixed annuity amount with no additional contribution allowances or CRUTs for a fixed percentage based on the balance of trust assets with the ability for additional contribution allowances.) This type of arrangement allows you to make irrevocable transfers of assets into the trust, which then is set to distribute whatever pre-agreed portion is allowed to a donor or to a beneficiary. Any sort of income interests will be distributed to the beneficiary, creating a positive cash flow to your chosen recipient. This is how many choose to leverage specialty trusts to grow their income for them on an automatic basis. It also can be easier than operating a custodial account for a beneficiary who is a minor, as you won’t be as restricted with the non-taxable “gift limit” of $15,000.

What types of assets can be transferred?

Stocks, cash, and real estate are among the most common types that can be irrevocably transferred this way for charitable purposes.

Looking for more financial strategy?

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