irrevocable trust
A trust that cannot be modified or cancelled after creation — provides asset protection and estate tax benefits.
Example
“The irrevocable trust removed $3 million from her taxable estate, saving significant estate taxes.”
Memory Tip
IRREVOCABLE — cannot be undone. Gives up control in exchange for protection and tax benefits.
Why It Matters
An irrevocable trust is important because it offers strong legal protection for your assets and can significantly reduce estate taxes for your heirs. Once established, the assets inside are generally protected from creditors and lawsuits, making it a powerful tool for wealth preservation and family financial planning.
Common Misconception
Many people mistakenly believe they can change their mind about an irrevocable trust after setting it up, similar to a regular will or revocable trust. In reality, once you fund and finalize an irrevocable trust, you have given up control of those assets permanently and cannot modify or cancel it without the consent of all beneficiaries.
In Practice
A 55-year-old parent with a 2 million dollar estate might create an irrevocable trust and transfer 1 million dollars into it for their children. Because the assets are no longer technically owned by the parent, they remove that 1 million from their taxable estate, potentially saving hundreds of thousands in federal estate taxes while ensuring those assets pass directly to the children outside of probate.
Etymology
From Latin 'irrevocabilis' meaning that cannot be recalled — a permanent legal structure.
Common Misspellings
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