Irrevocable trusts, unlike revocable trusts, are trusts that cannot be altered or revoked by the settlor. Irrevocable trusts may be created by a person during their lifetime for tax and asset protection purposes, or a irrevocable trust may be created within a Will or revocable trust to protect the inheritance of a beneficiary.
Irrevocable trusts are great tools to protect assets from creditors. When used properly, an irrevocable trust can help to reduce the size of a person’s estate subject to estate taxes or move assets beyond the reach of creditors. There are many different types of irrevocable trusts and each has a specific purpose, including: irrevocable life insurance trusts (ILIT), qualified personal residence trusts (QPRT), intentionally defective grantor trusts (IDGT), spousal lifetime access trusts (SLAT), and charitable remainder trusts (CRT).
A testamentary trust is a trust created to protect the inheritance of a beneficiary. Testamentary trusts may be created within a Will or other type of trust. The testamentary trust is irrevocable and the beneficiary cannot unilaterally change the terms of the trust. The testamentary trust provides instructions for when a beneficiary can access or benefit from their inheritance. Testamentary trusts might be used to protect a beneficiary’s inheritance from the beneficiary’s spouse or creditors.
