What is an Irrevocable Trust?

An irrevocable trust is a trust that cannot be revoked, modified or terminated. This is one of the ways it differs from a revocable living trust. The term “living” simply means that the trust goes into effect during the grantor’s (person setting up the trust) life. The person creating the irrevocable trust, called the grantor, completely gives up all rights to an asset transferred to the trust.

To sum it up, it is a trust that 1) goes into effect during the grantor’s life and 2) cannot be terminated or modified.

Why do i Need an Irrevocable Trust?

There are two common reasons why an irrevocable trust is used.

Irrevocable Trust

1) It can help reduce taxes at your death. By transferring an asset into an irrevocable trust, you are no longer the owner of that asset (for tax purposes) and therefore that asset is removed from your taxable estate. You will also be relieved of the tax liability on any income that may be generated from that asset. For example, an Irrevocable Life Insurance Trust is a type of irrevocable trust that removes the value of life insurance from your taxable estate.

2) It can protect your property. An Irrevocable trusts can also be used to protect assets from being squandered or to protect the assets of a person with a disability. For example, a Special Needs Trust is a type of irrevocable trust that allows your beneficiary to receive an inheritance at your death without disqualifying him or her from government benefits.

A comprehensive estate plan should implement not only your wishes but also consist of different estate planning tools, such as an irrevocable trust, to save you estate taxes.

If you have questions regarding Irrevocable Trust and how they can benefit you, please contact us at 818-649-9110 or click here for a free consultation. Our Sherman Oaks and Glendale living trust lawyers proudly serve surrounding cities. We will help you understand the difference between revocable and irrevocable living trusts.