How do I Set Up an Irrevocable Trust?
An irrevocable trust can be a versatile legal arrangement used for tax-sheltering, protecting assets and other purposes. Irrevocable trusts are legal entities operated according to a trust agreement which is followed by the trustee. Irrevocable trusts cannot be modified, amended or terminated, except in very limited circumstances. Assets transferred into a irrevocable trust become the property held in trust for the beneficiaries. The person creating the trust loses control and possession of the asset.
Plan the purpose and scope of the irrevocable trust. Because an irrevocable trust contains important legal rights, it must be thought out and carefully planned, with the understanding that any asset transferred into the trust is no longer yours to own or control.Step 2
Choose a trustee. This might be a close friend or commercial entity, such as a trust company. Note that commercial entities charge fees for their services.Step 3
Prepare an irrevocable trust agreement. This is a legal document that creates the trust. Templates are available, but they should only be used as a guide. The specific terms of the trust must be tailored to your individual needs.Step 4
Obtain a taxpayer identification number for the trust from the Internal Revenue Service. As a separate legal entity, your trust must account for any income it earns through interest on investments or additions of assets.Step 5
Check your state laws for specific requirements, such as the need to register the trust with the district court. Comply as necessary.Step 6
Transfer the assets into the trust. Transferring assets might require additional legal documents such as deeds for real estate transfers or a written acknowledgement.
- Irrevocable trusts are complicated legal arrangements that are not suitable for every financial situation. Specific steps to creating the irrevocable trust might depend on state laws, which vary. Because of the legal nature of this arrangement, an attorney should be consulted before proceeding.
Based in Traverse City, Mich., George Lawrence has been writing professionally since 2009. His work primarily appears on various websites. An avid outdoorsman, Lawrence holds Bachelor of Arts degrees in both criminal justice and English from Michigan State University, as well as a Juris Doctor from the Thomas M. Cooley Law School, where he graduated with honors.