Irrevocable trusts are trusts that cannot be changed during lifetime, or after death, absent a few statutory allowances. These are different from revocable trusts which can be modified any time during lifetime. However, the irrevocable trust has similar elements of the revocable living trust. These elements include: a grantor (or creator), appointment of trustee, contribution of trust property (often referred to as funding) and the designation of one or more beneficiaries. While this is rare in domestic irrevocable trusts, the irrevocable trust can also have a trust protector who has the responsibility of overseeing certain trustee actions. For instance, a trust protector could be used to approve distributions over a certain numerical amount. Irrevocable trusts can also be utilized to reduce estate and/or gift taxes for large estates and/or for individuals with large businesses.
The irrevocable trust can be governed by U.S. state or international laws. The particular laws that you use are usually the laws from the state you reside and where you have homestead. Certain trust jurisdictions are favorable over others because not all states are inheritance and estate tax free like Florida. If you live in one of these states, you may be able to move the “situs” or location of an existing irrevocable trust to a more favorable state, such as Florida. Further, the irrevocable trust cannot be changed or modified unless the modification is done through a special procedure called decanting, non-judicial modification or judicial modification. For instance, when moving the situs of a trust, an estate planner would usually have to follow a particular state’s decanting procedures.
Irrevocable trust planning is a great strategy to reduce a taxable estate, reduce gift taxes and/or remove assets from a large estate. It is important to understand that these unique irrevocable trusts are drafted in conjunction with basic estate planning (not in lieu of). As a recap, basic estate planning consists of the revocable living trust and/or last will and testament, durable power of attorney, designation of health care surrogate, and living will. Irrevocable trusts are very advantageous for individuals who have large businesses, large estates, extensive real estate property and/or large insurance policies on their lives.
Learn more about the most common irrevocable trusts:
- Irrevocable Life Insurance Trust
- Qualified Personal Residence Trust
- Special Needs Trust Planning
- Irrevocable Grantor Trusts
Learn more about the different estate planning strategies:
- Incapacity Planning
- Last Will and Testament (Traditional Long Will vs. Pour Over Will)
- Revocable Living Trust Planning
- Irrevocable Trust Planning
Contact Capital Planning Law, PLLC for your complimentary consultation to discuss your business law and corporate transactions, estate planning, probate, guardianship and/or real estate needs.