If you want to make financial gifts to someone, yet still control how the money is spent, the best way is to create an Irrevocable Trust.

How does it work?

You name a trustee (other than yourself) who is responsible for managing the trust for the named beneficiary – the person who will ultimately get the assets. This means you give up ownership and control of those assets. The trust spells out the terms and conditions under which the trustee makes distributions to the beneficiary.

An Irrevocable Trust can also be created under your will. Here, you keep control and use of your assets during your lifetime; the terms and conditions for the gift take place after your death.

What is the difference between Irrevocable and Revocable Trusts?

An Irrevocable Trust cannot be changed or revoked except under very limited circumstances. A Revocable Trust allows for flexibility. Both types should be set up with the assistance of a reputable estate planning attorney.

Why should you give up ownership of your assets?

Tax advantage. Giving away assets may reduce the value of your estate and its tax liability upon your death.

Make larger gifts without incurring gift tax liability.

Eliminate taxes on transferred assets. Transferring assets to the beneficiary relieves you of the taxes associated with those assets. If the recipient is a child or grandchild, they would be taxed at a lower rate, thereby reducing the family’s overall income tax burden.

Provide for education or other needs for minors or individuals you care for.