A revocable living trust and an irrevocable living trust are quite different, and, because of those differences, an estate plan that utilizes the wrong trust may be significantly impaired. Do you understand the purpose of the irrevocable living trust? The following questions and answers will help those who are just delving into the world of estate planning to understand the unique aspects of the irrevocable living trust.
1. For what purpose is an irrevocable living trust created?
The irrevocable living trust is not utilized for just one purpose; actually, it is used for several purposes. Primarily, this type of trust is used to transfer wealth, protect assets, and reduce one’s estate tax liability.
2. Are there different types of irrevocable living trusts?
Yes, irrevocable living trusts are not monochromatic. The most frequently used types are the irrevocable life insurance trust, a device that is regularly used to reduce tax liability; the self-settled trust and domestic asset protection trust, which provide protection for the assets of the settlor (i.e., the person who created the trust), as well as the settlor’s family; and, the grantor retained annuity trust, which is useful for avoiding or reducing the gift and estate tax.
3. Is it ever possible to change an irrevocable living trust?
Generally, it is not possible to modify, amend or revoke this kind of trust, which is why it is called an irrevocable trust. That being said, however, if a provision in the trust allows for modification or amendment then it may be possible to make some changes.