An irrevocable trust is a part of most serious, asset protection strategies. In the business of estate planning and asset protection, there are countless categories of trusts. And they all sound very serious. When Lawyers create new categories of trusts, they often create names that are very similar, often using many of the same words, as trusts by a different name. There are a number of main features or characteristics that differentiate every trust or every category of trust, and one such characteristic is whether a trust is revocable or irrevocable.
Revocable vs. Irrevocable Trust
A revocable trust can be changed, modified or terminated by the person who created the trust (known as a trustor or grantor). An irrevocable trust, on the other hand, cannot be terminated or modified without permission from the beneficiary of the trust.
Seen another way, the trustor (the almighty creator of the trust) of an irrevocable trust, loses control and ownership of the property placed into the trust. Why would somebody want to do that?
Some of the most common reasons for giving up control of your assets are for asset protection and tax planning. A creditor can’t take something from you that you don’t own, and your estate cannot be taxed for assets that are no longer a part of the estate.
Types of Irrevocable Trusts
Being “irrevocable” is simply a characteristic of a trust, so here’s a list of the common types of irrevocable trusts:
- Life Insurance Trusts (ILIT)
- Spousal Lifetime Access Trust (SLAT)
- Intentionally Defective Grantor Trust (IDGT)
- Domestic Asset Protection Trust
- Special Needs Trusts
- Dynasty Trusts
- Qualified Personal Residence Trusts (QPRT)
- Grantor Retained Annuity Trust (GRAT)
- Charitable Remainder Trusts
- Charitable Remainder Lead Trust
- Medicaid Intentionally Defective Trust
- Qualified Income Trust (a.k.a. “Miller Trust”)
Estate planning attorneys should be able to help you decide if any of these trusts are right for you, and should help you evaluate this need based on your personal goals, lifestyle, risk tolerance, and assets.
For people who are not worried about estate taxes, the Special Needs Trust is probably a more common kind of irrevocable trust.
Colin Ley is a Seattle asset protection attorney. He is also the co-founder of LayRoots along with his wife, Shreya.