At a certain point in their lives, many of our clients decide to gift money to their children. As many of us know, when you gift money to someone, you lose control over how that gift will be used. The recipient may have poor investment habits, addictive behaviors, poor spending habits, or be in the midst of a divorce or lawsuit. A gift to an irrevocable trust rather than a gift directly to that recipient adds some layers of control and safety that would not exist in an outright gift.
Trusts generally retain privacy, and distributions from trusts tend to be faster than distributions from non-trust accounts that are subject to probate. In addition, for larger estates where the assets are not needed for day to day living, one might reasonably expect the value of those assets to double every 10 to 12 years. By moving those assets out of the estate sooner rather than later, one reduces the size of one’s estate and reduces the odds of estate taxation if the estate size exceeds certain maximums (currently approximately $14mm for 2025).
Lastly, one might decide to locate the trust in a state with low or no state income taxes, leading to additional income tax savings.
The combination of privacy, distribution control, taxation, and asset protection may indeed be worth the relenquishment of control. If this is attractive to you, we welcome your questions and are happy to provide introductions to trust attorneys should you need one.
