Can you transfer assets out of an irrevocable trust?
If you know a little bit about estate planning, then you know that there is the revocable trust and the irrevocable trust. Both hold your assets to protect them in the case you are declared mentally incompetent or pass away. But what’s the difference between them? Well, that’s mostly in how they hold your assets, so let’s take a look at each of them.
What is a Trust?
First, let’s define what a trust is. A trust is a legal arrangement that governs the management, ownership, and distribution of assets. The person who places their assets onto the trust is called the Grantor, and the person who is legally considered the overseer of the asset is called the Trustee. The Beneficiary is the person who gets the benefits from the trust. Trusts are more complicated than wills, though both require the service of a legal services corporation or estate planning attorney to set up.
When setting up your trust, the estate planning attorney will usually ask you whether you want a revocable or irrevocable trust. The revocable trust is a trust that can be altered – or even revoked entirely – during the lifetime of the Grantor.
What is an Irrevocable Trust?
The irrevocable trust, on the other hand, is a trust that cannot be altered or entirely revoked after their creation – even if the Grantor is still alive. Once a property is placed into an irrevocable trust, nobody can transfer that property out of the trust, including the Grantor.
It may seem inconvenient to put all your assets in a trust that you can’t change or manage, but many people do this to safeguard assets from creditors, reduce estate taxes, and provide for family members who are financially irresponsible, underage, or have special needs.
An irrevocable trust is a more complex type of trust. To fully understand it, you should seek a legal help firm if you are aiming to transfer assets or learn more about it.
How to Convert Assets Out of an Irrevocable Trust?
The good news is: yes, you can transfer assets out of an irrevocable trust. Although the point of creating this type of trust is to make sure it cannot be modified, here are still some ways you can transfer assets out of an irrevocable trust.
Read Through the Fine Print of the Document
Some trust agreements might have been drafted in a certain language to be dissolved if its objective is no longer possible, in which case you can certainly transfer assets out once the trust is dissolved. At this point, the assets will be returned to the Grantor. In addition, there might be state laws that ask for beneficiaries to dissolve the trust. Everything depends on the drafting of the trust, which can be decoded with the help of a legal help firm. Some trusts may even allow modifications in certain special conditions, such as changes in tax laws or other laws.
In certain situations or when you are considering financial planning service, the court will consent to dissolve an Irrevocable Trust if the Beneficiaries or the Trustees request it. For example, if the trust’s purpose has grown obsolete or the cost of maintaining the trust is high or unreasonable, the court might decide to dissolve or modify the trust.
Work Before the Grantor Passes Away
If you want to transfer assets out of a trust, you must do it before the Grantor of the trust passes away. Once the Grantor – or the creator of the trust – passes away, the trust is locked, and you will no longer be able to work with loopholes in the documents.
Think about it this way: when the Grantor is alive, an irrevocable trust is flexible. Once the Grantor passes away, the rules of the irrevocable trust become set in stone, and nobody can move the assets. The only way for you to transfer assets out of an irrevocable trust after the death of the Grantor is if the trust is dissolved. To see whether or not an irrevocable trust can be dissolved, we recommend contacting a special needs trust attorney to see what legal procedures you are eligible for.
The rules and regulations around an Irrevocable Trust are detailed and complicated. Looking for loopholes or certain conditions is extremely difficult if you don’t have the help of a will and trust attorney. Remember to thoroughly read through the terms and conditions of an irrevocable trust will make the process of transferring assets from it considerably easier.
To conclude, it is a difficult task to transfer assets out of an Irrevocable Trust – but not entirely possible. To make sure you are making the right decision, always refer to a legal firm and or a living trust attorney.