In this article, we’ll explore what happens to an irrevocable trust when the grantor dies.
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Table of Contents
- What Happens to an Irrevocable Trust When the Grantor Dies?
- Frequently Asked Questions
- Ready to Explore Your Options?
What Happens to an Irrevocable Trust When the Grantor Dies?
When the grantor of an irrevocable trust dies, the successor takes control of the trust and carries out the terms of the trust. Carrying out the terms of the trust involves distributing assets to the named beneficiaries.
The purpose of an irrevocable trust is to separate the grantor from the assets that they have contributed to the trust. In practice, this reduces the taxable estate at the time of the grantor’s death, since the assets have already been given away. In short, ownership of the assets moves from the individual grantor to the trust. which is then charged with distributing them to the named beneficiaries when the grantor dies.
Nearly all cases, an irrevocable trust cannot be changed after the assets have been contributed. The only instance where it is permissible to change an irrevocable trust is with the consent of the named beneficiaries. Or, by order of the relevant courts.
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Frequently Asked Questions
Below are two of the most common questions that we receive from people about what happens to an irrevocable trust when the grantor dies. If you have further questions you would like answered, don’t hesitate to get in touch with us directly.
What Happens to Assets in an Irrevocable Trust When the Beneficiary Dies?
If the beneficiary of an irrevocable trust dies before the assets have been distributed, the grantor is required to amend the trust to reflect their updated wishes for distribution.
How Are Irrevocable Trusts Taxed at Death?
Irrevocable trusts are taxed at death separately from the taxable estate of the grantor. In other words, the estate tax does not apply to the assets owned by the irrevocable trust. This is in fact one of the main reasons individuals choose to use this structure. Of course, before making any tax or structuring decisions, it’s important to speak with a professional that understands your specific situation and requirements.
Can a Trustee Withdraw Money From an Irrevocable Trust?
A trustee cannot withdraw money from an irrevocable trust after the money is contributed. That said, money can be accessed in order to carry out the affairs of the trust. For example, paying for expenses related to the maintenance of the trust and paying for related services.
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