When is the last time you and your significant other took a romantic weekend to rekindle the fire? And spent most of the time, at the beach or in the mountains, talking about the pros and cons of an irrevocable trust?

Wild guess: How about … never?

Although vitally important in some cases, irrevocable trusts are sort of like heel spurs or picking kitchen paint colors as a topic of extended conversation. And yet …

There may come a time in your family’s life when having the should-I-have-a-trust conversation is critical. Whether you did it, or especially if you didn’t do it but should have!

All this is a sneaky way to lead into today’s Your Turn radio show. And while the subject doesn’t automatically draw your attention, in many cases it should. What such a trust is, and whether it is vital or useless for you and yours is something you have to deal with while you are still around. It won’t wait until after you’ve gone and mourning — maybe fighting — loved ones are dealing with your estate which, by the way, even the most modest feds have. Today at 10 a.m. we’ll be talking with Tom O’Rourke, a Washington area tax and estate attorney. Many of his clients are current or retired feds. Some need a trust. Some should avoid it. So how do you know? Here’s Tom’s explanation of what it is, and why you may need one. Or not. The show is at 10 a.m. on federanewsnetwork.com or 1500 AM in the D.C.-Baltimore area. The show will be archived on our home page so you can listen anytime or refer it to a coworker. If you have any legal questions about wills or trusts send them to me before showtime: mcausey@federalnewsnetwork.com

Irrevocable trusts are commonly used as part of a comprehensive estate plan, but they are not for everybody. They have significant tax and legal consequences and should only be entered into after considerable thought and with the guidance of a knowledgeable advisor. Once an irrevocable trust is signed and funded, it cannot be revoked or changed.

Irrevocable trusts allow you to accomplish several important goals. They can be used as a tax-planning tool, they can provide a vehicle for managing assets for the benefit of a person who is not capable of managing their own assets, and they may be used to protect assets from the claims of creditors.

Some of the more common tax planning trusts include a life insurance trust, a QTIP trust, and various types of charitable trusts. For many individuals, however, tax planning is no longer an issue. The federal estate tax exemption is now $12 million per person. Many states either have eliminated their estate tax, or have significantly increased the exemption amount.

Irrevocable trusts are also commonly used to accomplish non-tax goals. Some of the more common irrevocable trusts include a trust for a minor child, an education trust, a special needs trust for a handicapped adult child, a trust to protect an inheritance for a spendthrift child, or a trust to protect a child’s inheritance in the event of his or her divorce.

Irrevocable trusts also have a number of disadvantages including the following:

1. You must irrevocably give up the right to control the assets transferred to the trust.
2. It is a separate tax and legal entity and it is advisable to seek guidance from a knowledgeable advisor to make sure you are not falling into a tax trap.
3. It is often more expensive than using other less complex estate planning tools.

While irrevocable tools are certainly available to help you accomplish your estate planning goals, they should only be used after you have considered all advantages and disadvantages, and had the benefit of professional guidance.

-Tom O’Rourke

        Read more: Federal Report

Nearly Useless Factoid

By Daisy Thornton

Source: Amusing Planet

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