You’re coming up with your estate plan and thinking about putting an irrevocable trust into place. Before you do it, however, you want to learn more about these types of trusts and whether or not your beneficiaries will have to pay taxes on their inheritance. Here’s some more information.
What Is an Irrevocable Trust?
An irrevocable trust is the opposite of a revocable trust – it cannot be changed once you create it. Irrevocable trusts come in handy if creditors are coming after your money or you work in a high-risk profession for being sued, such as medicine or the law. It could also help with protecting money for Medicaid or other public assistance programs.
Is Money From an Irrevocable Trust Taxed?
Since you give up control over your assets when you set up an irrevocable trust, they are not subject to estate tax. They will also not have to go through probate, which is a time-consuming, public, and long process that could result in your loved ones not getting as much as they deserve.
However, keep in mind that your beneficiaries will need to report what they receive on their personal income tax return. This means that they will pay the taxes on the funds they collect rather than the trust.
It’s best to consult with an estate planning attorney to determine the best steps for minimizing taxes for your estate.
Reach Out to Legacy Law Group
If you need help with trusts, you can contact the estate planning attorneys at Legacy Law Group in Eastern Washington, Spokane Valley, and Spokane itself. Get in touch with us at (509) 315-8087.