What is an irrevocable trust?

An irrevocable trust is a trust that cannot be changed or amended after it is signed. When properly established one of the primary benefits of this type of trust is that the Settlor/Grantor, [the person(s) who sets up the trust], is no longer considered to be the owner of the trust property, thereby removing the trust property from the person's estate. This effect can potentially reduce the size of the grantor's gross estate thereby protecting the trust assets from being subjected to estate taxes by the IRS.

There a number of different types of irrevocable trusts. All of these trusts share two characteristics:

• Once they have been established, they cannot be altered or canceled.
• The grantor cannot also be both the trustee (the one responsible for making investment decisions) and the beneficiary (the one who receives the benefits from those investments).
  

The three most commonly utilized irrevocable trusts are:

• Irrevocable Income Only Trusts (IIOTs)
• Irrevocable Life Insurance Trusts (ILITs)
• Generation-skipping Trust (GSTs)

Irrevocable trusts are sometimes used to make gifts to others - the trust beneficiaries - "with strings attached." When making gifts to children or grandchildren, parents and grandparents have a choice, they may either give assets directly to the beneficiary or they can place the assets into trust, accompanied by a set of written instructions that direct how the trust's assets may be distributed and/or utilized. These instructions are often where the strings are attached to the gift(s). By placing the gift(s) in trust enables the grantor to control the use for which the gift is intended.