Irrevocable Trust

AAA

DEFINITION of 'Irrevocable Trust'

A trust that can't be modified or terminated without the permission of the beneficiary. The grantor, having transferred assets into the trust, effectively removes all of his or her rights of ownership to the assets and the trust.

This is the opposite of a "revocable trust," which allows the grantor to modify the trust.

INVESTOPEDIA EXPLAINS 'Irrevocable Trust'

The main reason for setting up an irrevocable trust is for estate and tax considerations. The benefit of this type of trust for estate assets is that it removes all incidents of ownership, effectively removing the trust's assets from the grantor's taxable estate. The grantor is also relieved of the tax liability on the income generated by the assets. While the tax rules will vary between jurisdictions, in most cases, the grantor can't receive these benefits if he or she is the trustee of the trust.

The assets held in the trust can include, but are not limited to, a business, investment assets, cash and life insurance policies.

For more on Irrevocable Trusts (and other types of trusts) check out How To Set Up A Trust Fund or our Estate Planning Tutorial

RELATED TERMS
  1. Dynasty Trust

    Long-term trusts created to pass wealth from generation to generation ...
  2. Asset Protection Trust

    A vehicle for holding an individual's assets to shield them from ...
  3. Special Needs Trust

    A legal arrangement and fiduciary relationship that allows a ...
  4. Taxable Estate

    The total value of a deceased person's assets that are subject ...
  5. Exemption Trust

    A trust whose purpose is to drastically reduce or eliminate federal ...
  6. Revocable Trust

    A trust whereby provisions can be altered or canceled dependent ...
Related Articles
  1. Budgeting

    Can trust funds be activated before the grantor intended?

    Trust law gives the grantor specific rights over the release of assets and therefore it is not possible to change the stipulations without his or her consent.
  2. Retirement

    What are the keys to setting up a trust fund?

    Setting up a trust to secure your assets for a beneficiary allows you to set the terms under which the beneficiaries are allowed to access these assets.
  3. Retirement

    What are the requirements that a trust needs to meet to be qualified?

    The requirements that a trust must meet to be qualified are as follows: The trust must be a valid trust under state law or would be except for the fact that there is no corpus. The trust must ...
  4. Taxes

    Tax-Efficient Wealth Transfer

    Taxpayers with large taxable estates were required to take steps to reduce them before 2011.
  5. Options & Futures

    How To Avoid Taxation On Life Insurance Proceeds

    Decrease the value of your taxable estate and prevent the tax man from getting you one last time.
  6. Retirement

    Establishing A Revocable Living Trust

    This arrangement allows you to have more control over your estate - both before and after your death.
  7. Options & Futures

    Getting Started On Your Estate Plan

    With some preparation, you can save your heirs from paying a hefty estate tax. Here are some tips.
  8. Retirement

    Saving Money With A Private Annuity Trust

    Learn about a strategy that could help you reduce taxes, diversify your portfolio and generate income.
  9. Investing Basics

    What are typical trust fund management fees?

    Learn about trust fund management fees, such as the annual management fee, annual expense ratio, brokerage commissions and trading expenses.
  10. Chart Advisor

    Short-Term Silver Bottom? Mining Stocks Think So

    Breakouts to the upside in a number of silver mining stocks could foretell a break higher in silver itself.

You May Also Like

Hot Definitions
  1. Weight Of Ice, Snow Or Sleet Insurance

    Financial protection against damage caused to property by winter weather specifically, damage caused if a roof caves in because ...
  2. Weather Insurance

    A type of protection against a financial loss that may be incurred because of rain, snow, storms, wind, fog, undesirable ...
  3. Portfolio Turnover

    A measure of how frequently assets within a fund are bought and sold by the managers. Portfolio turnover is calculated by ...
  4. Commercial Paper

    An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories ...
  5. Federal Funds Rate

    The interest rate at which a depository institution lends funds maintained at the Federal Reserve to another depository institution ...
  6. Fixed Asset

    A long-term tangible piece of property that a firm owns and uses in the production of its income and is not expected to be ...
Trading Center