Irrevocable Trust Information

An Irrevocable Trust is considered its own person in the eyes of the law. It may hold legal title to the property and can pay its own taxes. This separateness is what provides its asset protection and tax benefits. Ultimately, the Trust is the owner of its assets, not the person who created the Trust nor the beneficiaries.

Due to this, the assets cannot be taken to satisfy creditor claims against the Trust's creator or beneficiaries. The assets are also considered to be outside your death estate and marital estate. This means the Trust can lower your estate taxes and may also act as an alternative to a prenuptial agreement in the event of a divorce.

1. Settlor or Grantor: This is the person who creates the Trust. They transfer the title of their assets into the Trust’s name.


2. Beneficiaries: This is the person who benefits from the Trust. For example, Wyoming's Self-Settled Trust allows you to both create a Trust and be a beneficiary which is something not all states allow. In Wyoming, you may name yourself, your family, a charity, a pet, or anyone else to be the beneficiary.


3. Trustee: This person or institution oversees the Trust and acts on its behalf. In Wyoming, you may have a Public Trust Company, an unregulated Private Trust Company, or a Wyoming resident act as the trustee.


4. Trust Agreement: This is the document that describes the Trust, e.g. its intended purpose, beneficiaries, trustee, and other pertinent factors. It can be amended with the consent of the beneficiaries.


5. Certificate of Trust: This is a short document that lays out the important highlights of a Trust. It is what's commonly provided to a bank or other financial institution to show the Trust exists, who its trustee is, the EIN, etc.

Your Trust can be taxed in one of two ways. A Grantor's Trust acts as a pass-through entity. This means any income earned by the Trust flows directly through to the beneficiary's personal income statement. A Non-Grantor's Trust pays its own taxes and files its own tax return. This type of Trust can, for example, be used to avoid the recent SALT cap deduction limits.

It also provides more privacy since the Trust's income won't show on your personal income statement. This designation can be toggled on and off as needed depending upon the tax year. This means you can choose what works best in any given year for your situation by switching back and forth.

If you choose a Non-Grantor's Trust, then it's important to remember Wyoming has no personal or corporate income tax. We also have no taxes on gifts, estates, intangibles, etc. There will only be the federal taxes due which are generally the same across states. Here, however, Wyoming continues to shine due to a quirk in its tax and Trust laws. We allow certain revenues to be treated as preserving capital, subject to a cost-of-living adjustment, rather than as income. This can reduce your tax rate at the federal level too.

Setting up an Irrevocable Trust, such as Wyoming's Asset Protection Trust, involves careful consideration and legal guidance. While Irrevocable Trusts offer significant asset protection and tax benefits, they are less flexible than Revocable Trusts, requiring consent from beneficiaries for amendments. The advantages include shielding assets from creditors, avoiding probate, and potential tax advantages.

Whether you're interested in learning more about Asset Protection Trusts, estate planning, wills, or other estate planning instruments, consulting with a knowledgeable and experienced estate planning attorney is highly recommended. Trusts, especially Irrevocable Trusts, can provide valuable benefits, but they are complex legal structures that require careful consideration and expert guidance.