Irrevocable Living Trust

Irrevocable Living Trust - Advantages and Disadvantages

An Irrevocable Living Trust is an arrangement in which the grantor departs with ownership and control of property. Usually this involves a gift of the property to the trust. The trust then stands as a separate taxable entity and pays tax on its accumulated income. Trusts typically receive a deduction for income that is distributed on a current basis. Because the grantor must permanently depart with the ownership and control of the property being transferred to an irrevocable trust, such a device has limited appeal to most taxpayers.

Irrevocable Living Trust - Advantages

You observe your trustee in action
You avoid probate and court costs
You probably will save some fees
It is a good way to pass property to charity
You save any taxes there may be on the property going to charity on your death
With irrevocable charitable remainder trusts, created while you are living, you can get an income tax deduction during your life
You may save taxes on capital gains on property placed in a charitable remainder trust

Irrevocable Living Trust - Disadvantages

Property must be transferred, so there is initial cost in setting up the trust
You lose all control over the property with most irrevocable trusts
It requires annual fiduciary accounting and possible tax returns
It may require payment of annual trustee fees
There may be fees at the time of trust termination
You can't change your mind and get the property back

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