Tax-Planning Client Letter on Irrevocable Trusts - Research Paper Example

An irrevocable trust cannot be revoked, terminated, or modified unless the beneficiary approves of it. This implies that my client (the grantor) seizes to have any control over the property as he has effectively removed his rights of ownership to the trust and the assets.

My client is likely to have crucial benefits when he establishes irrevocable trust. In this case, he will have estate and tax considerations as part of the asset under the irrevocable trust that will not be reflected in his tax obligations. By removing a part of the estate from all incidents of ownership, my client will effectively remove them from his taxable estate, Hosseini (2013). Furthermore, the client will be relieved from tax obligations emanating from that part of the asset under irrevocable trust.

Though tax law differs among jurisdictions, the granter will not be exempted from the aforementioned tax relief if he remains the trustee of the trust. The fact surrounding this case is that irrevocable trust has both drawbacks and benefits in equal measures. On the part of the disadvantages, the trust cannot be revoked, as the name suggests. In addition, it cannot be amended to accommodate other inclusions or exclusions. On the other hand, the granter is exempted from various tax burdens including estate and income taxes.

These facts are significant for my client so as to make a sound decision. The issue in this legal matter is that the granter is interested in establishing an irrevocable trust in favor of his two grandchildren. In this case, his interest is two have the beneficially receive the income from the estate to be distributed to the two children until they are 20 years of age. In this case, they are interested in knowing the benefits and drawbacks of taking this particular choice or rather to learn of other available channels that can be used to address their interests.

Rules and regulations governing estate tax in America are enshrined in the estate and gift act of 2001 together with multiple amendments to the same. The Act provides that estates are subjected to taxation that is gazetted in the government press in a given period of time.