4th May 2013
The 3 most common irrevocable trusts are:
1. The Irrevocable Life Insurance Trust, often referred to as an “ILIT”. This kind of trust is designed to create liquidity for payment of estate taxes, and at the same time taking the asset out of the decedent’s estate, so as to reduce the taxable estate. The life insurance policy on the decedent’s life is the sole asset of this kind of irrevocable trust.
2. The Charitable Trust, of which there are several kinds, including the Charitable Remainder Annuity Trust (CRAT) and the Charitable Remainder Unitrust Trust (CRUT). These kinds of trusts are designed for both tax and charitable purposes. These kinds of charitable trusts must be irrevocable under federal tax law.
3. The Special Needs Trust, commonly set up to benefit a disabled child or family member. In order to benefit the disabled person, and at the same time prevent the disabled person from being disqualified from governmental aid and programs, this kind of trust must be irrevocable, with a 3rd party serving as the trustee, and with special provisions to make it qualify as a special needs trust.
Dwight Edward Tompkins,
Orange County Estate Planning Lawyer.