Irrevocable Living Trust
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Irrevocable Living Trust - Advantages and Disadvantages
A Living Trust Irrevocable - Definition
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.Advantages of a Irrevocable Living Trust
- 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
Disadvantages of a Irrevocable Living Trust
- 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
Irrevocable Living Trust
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