Irrevocable Trust

An irrevocable trust is a type of trust agreement in which the grantor (the person who established the trust) cannot modify or revoke the trust’s terms or conditions, with rare exceptions. This is in contrast with a revocable trust, which can be changed or revoked by the grantor at any time during their lifetime. 

Irrevocable trusts offer various estate planning benefits like reducing estate taxes, protecting assets from creditors, providing for the financial needs of beneficiaries, and potentially preserving eligibility for government benefits like Medicaid. 

Benefits of an irrevocable trust might include: 

• Tax efficiency: Generally, assets that are transferred into an irrevocable trust are removed from the grantor’s taxable estate, which can help reduce estate taxes when the grantor dies. There are additional tax benefits associated with certain types of advanced planning strategies such as grantor retained annuity trusts (GRATs) and charitable remainder trusts (CRTs). 
• Asset protection: Assets held within an irrevocable trust may be protected from creditors or legal action brought against the grantor. This is because assets held in an irrevocable trust are legally no longer owned by the grantor. 

While irrevocable trusts can have many benefits, their complexity and permanence means they should not be created without careful consideration. The grantor of an irrevocable trust likely needs guidance from legal and financial professionals to ensure that the trust is correctly provisioned when it’s established.