Define: Irrevocable Trust

An irrevocable trust is a type of trust arrangement in which the grantor (the person who establishes the trust) relinquishes control and ownership of the trust assets permanently. Once created, an irrevocable trust typically cannot be modified, amended, or revoked by the grantor, except in rare circumstances with the consent of all beneficiaries or by court order. Irrevocable trusts are often used for estate planning purposes to achieve various objectives, such as asset protection, estate tax reduction, probate avoidance, and providing for the long-term financial needs of beneficiaries. Because the grantor gives up control over the trust assets, they are shielded from creditors, lawsuits, and estate taxes, providing a level of protection for the beneficiaries. Additionally, assets transferred to an irrevocable trust are usually removed from the grantor’s taxable estate, potentially reducing estate taxes upon the grantor’s death. However, establishing an irrevocable trust requires careful consideration and planning, as it involves permanently surrendering control over the assets and entails certain legal and tax implications.

An irrevocable trust is a trust that once established, cannot be revoked, terminated, or changed in any way.

This means that upon transferring assets into an irrevocable trust, the grantor can reserve no right to amend or abolish irrevocable trust proceeds. Furthermore, the grantor of an irrevocable trust is not permitted to make withdrawals from the trust principal. However, in some cases changes can be made to an irrevocable trust account upon the consent of a beneficiary. By this virtue, a living trust would not be an instance of an irrevocable trust. Examples of irrevocable trust accounts may include child trusts, as well as 2503 trusts. Irrevocable trust accounts may be set up for the purpose of saving on estate taxes, as well as protecting against creditor claims. An irrevocable trust may also be used to facilitate one or more life insurance plans.

This site contains general legal information but does not constitute professional legal advice for your particular situation. Persuing this glossary does not create an attorney-client or legal adviser relationship. If you have specific questions, please consult a qualified attorney licensed in your jurisdiction.

This glossary post was last updated: 29th March, 2024.