What is an Irrevocable Trust? | IRS Definition of a Trust

Irrevocable trusts are frequently used as inheritance vehicles, to reduce taxation and to control the allotment of funds to children, grandchildren, and even charities. When a grantor sets up an irrevocable trust, they put assets (cash, stocks, bonds, real estate, or anything else) into a trust account, and then they state how that money will be used, generally to the benefit of a beneficiary such as a relative or a charity. Once an irrevocable trust has been established, the grantor cannot change the terms of the trust. The trust becomes a separate entity with its own EIN.

Many irrevocable trusts are irrevocable because the grantor has since passed, and thus the grantor wouldn’t be able to change the trust regardless. But there are still some ways to change an irrevocable trust, even if it is irrevocable: usually by ensuring that the beneficiary and everyone else involved will validate those changes. Charitable trusts also have some conditions that allow for the changing of the trust, and some ability to change the trust can also be baked in (such as canceling the trust if, for instance, a child drops out of school).

Written by Maurice Mallory