There is much importance to setting up an irrevocable trust, a legal arrangement that avoids probate and allows assets to pass directly to heirs. But estate planning experts also note there are risks involved with these types of trusts, some of which can be avoided by including a disclaimer in your trust document. This blog post will focus on how important are crummey letters when setting up an irrevocable trust.
1. Avoid probate
Probate is a legal process that applies to estates and trusts. It includes reading a will, appointing an executor, overseeing the estate and providing an accounting at the conclusion, and filing for approval with the court. Probate also involves collecting assets from beneficiaries and paying out debts. When an irrevocable trust is set up, it is not part of probate. Instead, assets pass outside of probate because they are already in trust at death.
2. Avoid income tax consequences in some cases
An irrevocable trust is subject to a flat income tax rate, according to the state’s rules where it is set up. With an estate that goes through probate, you may be put through to federal estate tax and gift and estate taxes. Northbrook Estate Planning lawyer will help you understand the tax implications of establishing an irrevocable trust.
3. Avoid probate and inheritance taxes
An irrevocable trust is not subject to probate; therefore, there are no heirship, contests, or other inheritance issues that the divorce process can complicate. Most people who draft an irrevocable trust intend to avoid all types of taxes, including estate and inheritance tax. Northbrook Estate Planning lawyer will help you to determine how these taxes may be avoided and minimized, hopefully to your benefit.
How important are crummey letters when setting up an irrevocable trust? They are essential because they can help to avoid the potential legal and tax issues that may arise with a revocable trust.
Contact Orlowsky & Wilson Ltd. how-important-are-crummey-letters-when-setting-up-an-irrevocable-trust/ for more information.
