Many New York residents who have looked into estate planning are familiar with revocable trusts. These trusts are often favored because they can be changed during the lifetime of the grantor, unlike an irrevocable trust, which cannot be easily changed once executed. Not as many people are even aware that irrevocable grantor trusts exist because they can ordinarily not be modified.
Irrevocable trusts can be modified, but not without meeting certain criteria. All of the beneficiaries to the trust will need to be consulted, and one or more of them might not give consent to any changes. In addition, it is often necessary to obtain a court order to modify or cancel the trust. To combat these eventualities, the trust can provide for a “trust protector” who can make the decision to modify it.
New York readers might be wondering why it would be beneficial to take the risk of not being able to modify or cancel the trust. Simply put, the assets held in an irrevocable trust are out of reach of future creditors. This is one of the advantages to leaving any beneficiary assets in a trust since all trusts become irrevocable after death. A living grantor can receive this same benefit from a trust that is not revocable.
Deciding whether irrevocable grantor trusts are worth the potential complications of modification or termination depends on an individual’s current circumstances and potential future circumstances. A thorough understanding of the pros and cons of an irrevocable and/or revocable trust is needed in order to make an informed choice. Understandably, it would be in a party’s best interest to enlist the advice and assistance of an estate-planning attorney.
Source: lakeconews.com, “Estate Planning: Irrevocable grantor trusts“, Dennis Fordham, March 12, 2016
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