Irrevocable Trust Definition and Legal Meaning
On this page, you'll find the legal definition and meaning of Irrevocable Trust, written in plain English, along with examples of how it is used.
What is Irrevocable Trust?
A trust that is permanent only after it has been established which the creator cannot change or revoke.
History and Meaning of Irrevocable Trust
An irrevocable trust is a type of trust that cannot be modified, changed, or terminated without the permission of the beneficiaries. This type of trust is permanent, as opposed to a revocable trust, which can be altered or cancelled by the trust’s creator. Once the creator of an irrevocable trust transfers assets to the trust, those assets become the property of the trust and the creator no longer has control over them. Irrevocable trusts are often used as a means of estate planning and asset protection, as they allow for assets to be passed on to beneficiaries without being subject to estate taxes or creditors.
Irrevocable trusts have been used in estate planning since the 1700s. As the laws governing property and inheritance changed over time, so too did the use and purpose of irrevocable trusts. In modern times, irrevocable trusts have become increasingly popular as a means of protecting assets and minimizing tax liabilities.
Examples of Irrevocable Trust
A wealthy individual creates an irrevocable trust for their grandchildren, with funds that cannot be accessed until each grandchild reaches the age of 25.
A business owner creates an irrevocable trust to transfer ownership of their business to their children after their death, in order to avoid estate taxes.
A family with a disabled child creates an irrevocable trust to ensure that their child is financially provided for after their death.
Legal Terms Similar to Irrevocable Trust
Revocable Trust: A trust that can be modified, changed, or terminated by the creator.
Testamentary Trust: A trust that is established in a will and takes effect after the death of the person who created it.
Grantor Trust: A trust in which the creator retains certain rights or privileges, such as the ability to receive income from the trust.