In an irrevocable trust, its terms cannot be changed or terminated without the permission of the grantor’s named beneficiary. Once the grantor places an asset in an irrevocable trust, it cannot be revoked because it is seen as a gift to the beneficiary. The grantor can control the terms and uses of the trust assets with the consent from the trustee and the beneficiary. Creating this type of trust before marriage could help shield your assets from division in a divorce, especially those that you wish to give to your children.
There are two types of irrevocable trusts: living trusts and testamentary trusts. A living trust is created and funded by a person during their lifetime. There are different types of living trusts, some examples are:
Testamentary trusts are irrevocable by design because they are created after the death of their grantor. The trust is funded by the deceased’s estate according to the terms of their will. The only way to make changes to a testamentary trust, or terminate it, is to change the will of the trust’s creator before they die. If you wish to protect assets for your children, you should set up a living irrevocable trust that names them as beneficiaries. In the event that you and your spouse get divorced, the assets in this trust cannot be divided.
If you and your former spouse previously used an estate planner together, it is likely that the estate planner is now unable to represent both of you because it would be a conflict of interest. Both of the parties in a divorce should seek new advisers, and should review a new estate plan every three to five years. The most important thing to do after your divorce is to get a new plan in place as soon as possible.
If you are recently single you may also want to review or set up trusts to shield assets from creditors and other predators. These trust accounts are often used to set aside funds for children, with arrangements, such as matching funds for income earned.
Setting up any type of trust can be complicated and that is why an attorney is necessary. While many individuals think that trusts are only beneficial for the wealthy, this is not necessarily true.
Regardless of your specific needs and goals, a conversation with an attorney at Sparks Law could help you decide what type of irrevocable trust might be best for you if you are trying to protect your assets for your children in the event of divorce. Call today to discuss your situation and secure your child’s financial future.