You Cannot Revoke an Irrevocable Trust
An irrevocable trust is one that cannot be modified, terminated or amended once it has been created. The grantor, having transferred all of the assets into the trust, effectively removes his or her ownership rights to the assets contained within the trust.
Irrevocable trusts are used to achieve a variety of estate planning goals, and this often includes reducing or even eliminating estate taxes by removing property from the trust-maker's estate; reducing or eliminating estate taxes for future generations; establishing a charitable legacy; and providing asset protection for a spouse, decedents and other beneficiaries.
What sets irrevocable trusts apart from "revocable trusts" is that they cannot be terminated once they have been finalized. In respect to trusts, the term living means that it goes into effect during the grantor's lifetime; therefore, an irrevocable living trust is one that goes into effect during the grantor's life and cannot be revoked. A "testamentary" trust is one that is made during the grantor's life but does not take effect until the grantor's death.
There are a wide variety of different types of irrevocable trusts that are made for different purposes. The two most common reasons to establish an irrevocable trust are to reduce taxes and protect property, some of which include:
- Bypass Trusts – Used to reduce estate taxes when second spouse dies.
- Charitable Trusts – A trust that reduces income and estate taxes through charitable gifts.
- Spendthrift Trusts – These allow you to control and protect gifts to those who may not be able to manage money themselves. The beneficiary cannot access the trust on their own and it's protected from creditors.
- Special Needs Trusts – These provide financial support for disabled persons without affecting their qualifications for government benefits.
Haddon Heights Estate Planning Attorney
One of the most significant distinctions between a revocable trust and an irrevocable trust is the estate tax considerations. When you place property into an irrevocable trust it is no longer considered a part of your estate, meaning trust assets won't be included in your estate's value when it comes to owing estate taxes.
Setting up a trust can be a valuable component to an estate plan; however, since everyone's situation is unique, it will be necessary to discuss any and all tax implications – gift, federal estate, and state inheritance or estate – for property transfers into revocable and irrevocable trusts.
For more information, contact me, your Haddon Heights estate planning lawyer at Harris Law Offices to schedule your free consultation by calling (856) 681-0429.