A refreshed look at irrevocable trusts

One of the reasons that New York residents might choose a revocable trust instead of an irrevocable trust for handling their estate planning needs is that irrevocable trusts are traditionally ineligible for changes. Irrevocable trusts have also traditionally included very limited oversight by just one or two trustees. However, flexibility available for modern trust planning makes it possible to achieve a customized plan based on one’s goals, beneficiaries and possible future needs with a more customized approach to oversight.

Trust assets can be affected by state tax laws, which makes the idea of change in situs an important option in planning. This may make it easier to change the location of the trust in the future if tax conditions warrant such a move. People might find that their goals for the trust change, which makes decanting, which is the ability to pour one trust into another, an important consideration. Although a number of states permit this action, it is better to build this potential need into the trust. Meanwhile, people who are considering the creation of an irrevocable trust might be more confident about using this avenue to minimize the tax impact on their assets when they realize that there is flexibility.

In place of one or two trustees, newer trusts often have multiple individuals appointed for the oversight of different elements of the plan. An administrative trustee handles the task of managing records and filing required tax returns. Another trustee might be appointed as a protector, holding the power to fire a trustee and make a replacement. This can be helpful for ensuring that assets are properly handled.

People who have modest estates might wonder whether an irrevocable trust is appropriate for their needs. It may be helpful for them to meet with an estate planning attorney and learn more about the various types of trusts to ensure that an appropriate choice is made.