A trust can play a unique role in estate planning. Unlike a will, a trust can provide important tax benefits while also allowing the creator of the trust -- the grantor -- to ensure that his or her wishes are fully upheld even after death. Revocable trusts are fairly common, but irrevocable trusts are often looked over despite a number of benefits.
A grantor cannot alter or revoke an irrevocable trust, hence the name. This immediately puts some Florida residents off the idea of such a trust, but this fear might be misplaced. With this type of trust, a grantor transfers ownership of certain assets into the trust. This means that the trust technically owns the assets, so upon the grantor's death those assets will not be subjected to the estate tax. An irrevocable trust also shields assets from most creditors and even legal judgments.
Grantors often choose to distribute life insurance benefits through irrevocable trusts. Upon a grantor's death, the funds from the life insurance policy would pay out into the trust. A trustee would then manage the trust according to the grantor's instructions, which includes paying out funds to the named beneficiary or beneficiaries. The irrevocable trust also prevents the life insurance benefits from being taxed.
An irrevocable trust can also make it easier to transfer property to a surviving spouse. While using a will to pass on property is certainly a good idea for some people, an irrevocable trust is a more appropriate option for others. Like with life insurance benefits, a trustee will manage the trust on behalf of the surviving spouse. The trust can pay out an income as well, which can ensure continued financial support.
Minimizing estate taxes is a priority for many people in Florida. In such cases, trusts -- in particular irrevocable trusts -- can be extremely helpful. Not only do trusts keep assets free of estate taxes, these important estate planning tools also provide ongoing help and financial support for surviving beneficiaries.