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What to consider before creating an irrevocable trust

On Behalf of | Mar 5, 2021 | Blog, Divorce

An irrevocable trust may be an effective tool for protecting your assets in a New Jersey divorce. It may also be an effective way to ensure that your children receive their full inheritance regardless of what happens to you. However, it is important to understand that you no longer have any control over items that are placed in such a trust.

The potential benefits of an irrevocable trust

The primary benefit of executing such a document is that the assets in the trust are held outside of your estate. This means that they generally cannot be seized by creditors or ceded to a spouse in a divorce settlement. Furthermore, the value of those items will not be included for the purposes of determining how much your estate is worth. This can help to minimize your estate tax bill or make it easier to qualify for government benefits.

The potential drawbacks to an irrevocable trust

Once an item is placed in such a trust, you no longer have any control over it. Furthermore, its terms cannot be changed once the document is executed. Therefore, you will need to be 100% certain that using this type of estate planning tool is truly in your best interest. Your divorce attorney may provide more information regarding the potential pros and cons of an irrevocable trust.

Putting assets in a trust may be an effective way to protect them from being divided in a final divorce settlement. However, if the trust is not executed properly, a judge may deem it to be invalid. An attorney may be able to help you create a trust in a manner that conforms with state law. He or she may also help you alter your estate plan after the divorce is official.