IRREVOCABLE TRUST
Back to GlossaryDefinition
A trust created by a granter that cannot be revoked or that cannot become irrevocable upon the grantor's death.
Summary
An irrevocable trust is a legal arrangement where assets are permanently transferred to a trustee to manage for beneficiaries, and the person who created the trust (grantor) cannot modify, terminate, or reclaim control over the trust once it's established. Unlike revocable trusts, these trusts offer significant tax benefits and asset protection because the grantor legally gives up ownership and control of the assets forever.
Usage Context
Understanding irrevocable trusts is crucial when studying estate planning, tax strategies, wealth transfer techniques, and asset protection methods. This concept is essential for analyzing complex family financial planning scenarios and comparing different trust structures.
Common Confusions
- Thinking they can change or cancel an irrevocable trust like a revocable one
- Believing the grantor still owns the assets after transfer
- Confusing the roles of grantor, trustee, and beneficiary
- Assuming all trusts provide the same tax benefits
- Not understanding that irrevocable trusts are permanent decisions
- Thinking irrevocable trusts are only for wealthy people
