Irrevocable Trust

An irrevocable trust is a type of living trust that cannot be modified without permission of the beneficiary. Once an irrevocable trust is created, nothing can be done to change or end the stipulations of the trust unless permission is directly granted by the named beneficiary. This is because the creator of the trust has effectively signed over his or her assets to the beneficiary when placing them into an irrevocable trust.

Advantages and Disadvantages

While there are many benefits to withdrawing ownership from your estate, there are also drawbacks. When you release possession of your assets, you are also releasing the responsibility to pay taxes on the estate. Furthermore, there will be no tax liability on any income that could be generated by these assets, because technically they are no longer in your name. For many, these tax benefits are more than enough incentive to place their assets in an irrevocable trust.

For others, however, the inability to modify the conditions or terminate their trust in any way is nonnegotiable. If you want to retain control over your estate, then it is not advised that you pursue an irrevocable trust.

Types of Irrevocable Trusts

There are many different types of irrevocable trusts that can be used for different purposes. Usually, they are used to reduce taxes and protect property. Here are few common types:

• Bypass Trusts: a trust that allows a spouse to use property that is included in a trust once the other spouse dies. The surviving spouse never actually owns the property, so when that spouse dies, the property is not part of his or her estate.
• Charitable Trusts: a trust that transfers property to charities. The charity can receive money throughout your lifetime or at your death.
• Life Insurance Trust: a trust that transfers life insurance to a trust. The trust must have existed for three years before the death of the grantor.
• QTIP Trusts: a trust that allows estate tax payments to be postponed until the both spouses have passed away
• Spendthrift Trusts: trusts that allow you to control your beneficiaries' management of your money. The trustee can only transfer money according to the terms of the trust.

Let a probate lawyer know what type of property you want to protect. A qualified legal representative can help you decided if an irrevocable trust is the right decision for you. If you do not want to relinquish control of your estate, then you may want to consider a revocable trust, which will allow you to change your trust during your lifetime. Setting up a trust can be very difficult, so make sure that you have a skilled estate planning lawyer to guide you through the complicated process.