Irrevocable trusts are a common tool in estate planning. They play an important role in protecting assets, reducing taxes, and preserving legacies from one generation to the next. Irrevocable trusts come into existence in a number of ways.
A trustor who created a typical revocable living trust may die, at which point the trust becomes irrevocable. Or perhaps the trustor created an irrevocable trust to protect assets or remove a large life insurance policy from the trustor/insured’s estate for estate tax purposes. The trustors may have grandchildren for whom they wish to establish an irrevocable minor’s trust for future education.
There are many reasons for using irrevocable trusts, but a common characteristic is that they are typically not amendable. A carefully drafted irrevocable trust may provide some flexibility, for example through a limited power of appointment. But generally speaking, an irrevocable trust that has “gone wrong” in some way can be difficult to change.