Irrevocable Trusts are one of the two basic categories of trusts. Unlike Revocable Trusts, once a granton transfers ownership of assets to an Irrevocable Trust, its terms cannot be modified, amended, or terminated without the permission of the trust’s beneficiary or beneficiaries.
This rigidity sounds scary to many people, but Irrevocable Trusts provide tremendous benefits when implemented properly, which the more flexible Revocable Trusts do not offer:
- Minimization of Estate Taxes: Wealthier families can fund an Irrevocable Trust with life insurance proceeds, create charitable trusts, or gift substantial property to avoid estate taxes.
- Eligibility for Government Programs: Disabled beneficiaries have stringent income and asset limitations and overstepping those limits can cause their government benefits to be revoked.
- Protection of Assets: Protecting your assets from your creditors usually requires a trust to be irrevocable. Generally, the more restrictive the trust, the more protection it provides from creditors.