How an Irrevocable Trust is utilized in Asset Protection
An irrevocable trust is a trust whereby the Grantor transfers an asset to the trust but loses conrol of that asset to an independent trustee. Unlike a living trust, the trust deed doesn't allow the Grantor to retain any control over the trust or the trust asset as the asset is now under the control of the independent trustee.
Furthermore the Grantor cannot change the terms of the trust deed or dissolve the trust once it has been established.
Because the irrevocable trust is independent from the Grantor, it is a sensible asset protection strategy when transferring your asset to your beneficiaries. Because the asset is now under the control of the trustee, the law imposes strict obligations on the trustee. The trustee is to act prudently, manage the trust asset in the best interests of the beneficiaries and ensure that he receives no private advantage from the management of the trust asset.
Features of an Irrevocable Trust
- Avoids Probate
- Considered to be a sensible asset protection formation
- May defer income taxes in certain circumstances
- Assets are not subject to Estate Tax
- Assets may not be subject to Capital Gains Tax
