An irrevocable trust is created during the maker’s lifetime that does not allow the maker to change it. An irrevocable trust can not be changed after they are made. Irrevocable trusts are useful financial tools because there is a set structure that must be executed based on the wishes of the trust maker.
Uses of irrevocable Trusts
Many times irrevocable trusts are used to fund legacies for children or grandchildren. Others might use an irrevocable trust to make gifts of property or life insurance.
The Structure of an Irrevocable Trust
Every irrevocable trust must have four primary elements:
Grantor or Settlor
The first element is the trust maker – the person who makes the trust. This person can also be
called the “Grantor” or “Settlor.” A Grantor or Settler sets up the trust to follow rules which can not be changed afterward.
The person who manages the trust assets and performs the functions of the trust.
This person is called the “Trustee” and can sometimes be the same person as the trust maker or can be a professional or institutional trustee. When the initial trustee is no longer able to serve as a trustee, another must be elected who is then referred to as the “Successor Trustee.” The trustee must follow the wishes of the grantor in the case of an irrevocable trust.
Beneficiary or Heir
A beneficiary is a person who will receive the benefits of the assets held within the trust. The original beneficiary is sometimes the trust maker, however, in many types of trusts the trust maker is not the beneficiary. After the trust maker is deceased, then the assets will be passed to whoever the grantor designates. Normally the children or family members become the next line of beneficiaries. Of course, if more than one person exists, they are called “Beneficiaries.” A beneficiary or heir must follow the rules of the trust and very frequently will have stipulations or ways in which they can use the assets that are being passed to them. It is frequent that a Settlor will set up a trust and beneficiaries will be required to use a portion of the assets on education or on their children.
The Corpus refers to the assets inside the trust. These assets are called the trust “Corpus.”
Lifespan of an irrevocable trust
An irrevocable trust has no time limit and will last as long as there are assets left in the trust based on the wishes of the individual who set up the trust.
Does an Irrevocable Trust Pass Through Probate?
No, an irrevocable trust does not pass through the probate process. An irrevocable trust has a clear and designated beneficiary for the assets so there is no need for the probate court to be involved to help with the succession of assets.
Difference between an irrevocable trust and a revocable trust
An irrevocable trust can not be changed once it is set up and funded. An irrevocable trust is different from a revocable trust because a revocable trust can be amended, added to or revoked during its maker’s competent lifetime. After the maker is deceased, this type of trust is typically converted to irrevocable.
The History of Irrevocable Trusts
Trusts have been around longer than most people realize. The first trust dates back to the Roman Empire in 800 A.D. In that society, only citizens of Rome could own property. When faced with deployment, soldiers would transfer ownership of their property to a trusted friend to make sure their families were cared for. During the Roman occupation of the British Isles, trust became a familiar tool to protect lands from rogue governors and lords. The concept of trust arrived on American soil along with the
Trusts were once regarded only as a tool available to the ultra-wealthy. While this was true for many decades, there has been mass adoption of trusts because they are useful, flexible and powerful estate planning tools. People have discovered that trusts can be useful for almost any socioeconomic class. The irrevocable trust is different from trusts in old societies because once property or assets are transferred into the trust they can not be changed or amended.« Back to Glossary Index