Irrevocable trusts are a type of trust that can’t be modified, changed, or terminated without the consent of the beneficiary. Thus, once a person has transferred their assets into an irrevocable trust, they no longer have any ownership rights over the assets. In most jurisidictions, every trust is considered to be irrevocable, unless the person states otherwise in the trust document.
Irrevocable trusts are associated with many different pros and cons. Some advantages of irrevocable trusts include:
- Simplicity: Termination is only at the discretion of the beneficiary and nobody else. This makes the execution of the trust subject to fewer disputes.
- Standard trust form: In most jurisdictions, irrevocable trusts are usually the standard trust form. Thus, you wouldn’t have many technical concerns when it comes to the requirements under most state laws
- Customizable: Irrevocable trusts can sometimes include specific instructions regarding trust termination. This makes it even less likely that a dispute will arise over termination conditions
- Tax consequences: Once the grantor transfers their property to the trust, they become relieved of any tax liability on the property
Some cons of irrevocable trusts may include:
- Inflexible terms: By nature, irrevocable trusts are not subject to much flexibility; once the terms are set they must be followed. This is different from revocable trusts, which can often be modified by the grantor later on
- Complexity: While relatively straightforward, irrevocable trusts may sometimes still be complex. They may often require the assistance of an attorney when drafting the document
Thus, when choosing the type of form you’d like to work with, you should weigh the pros and cons of irrevocable trusts, especially in comparison with revocable trusts.
Irrevocable trusts have their advantages and their disadvantages. Also, every jurisdiction may have different rules when it comes to the types of trusts that are allowed. As such, you may need to hire an estate lawyer when it comes to drafting, reviewing, or editing an irrevocable trust. Your attorney near you can also represent in you in court during a lawsuit if this becomes necessary.