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What is an Irrevocable Trust?

Trusts are established to provide legal protection for a person’s assets, and to ensure those assets are distributed according to that person’s wishes. Depending on factors such as age, financial situation, and special needs of your beneficiaries, you might find an irrevocable trust to be necessary.

While a revocable living trust allows changes after the terms have been finalized, an irrevocable trust is simply the opposite – it cannot be modified or terminated after it's been signed. Additionally, once an asset (such as investments, cash, or insurance policies) has been gifted as part of the trust, that gift cannot be revoked.

When deciding how to leave assets to your heirs, consider some benefits of an irrevocable trust:

  • Provides financial management for minor beneficiaries
  • Protects a beneficiary's inheritance from reckless spending habits
  • Takes advantage of the estate tax exemption  Allows gifts to any children under favorable tax rules
  • Supports a disabled beneficiary without disqualifying them from existing benefits

You may also use a trust to create a plan for:

  • Medicaid protection
  • Charitable giving
  • Reducing estate tax
  • Divorce or creditors

They also have some disadvantages, including:

  • Requiring you to give up direct control over the assets
  • Ongoing time and costs for administration of the trust
  • Possible tax implications involved

Important notes: 

  • To prevent any assets from being misused in an irrevocable living trust, assets can be held and distributed to beneficiaries with conditions attached
  • You can create an irrevocable trust inside your will or revocable living trust. The irrevocable trust is valid for the life of the beneficiary or until a specific condition is met, e.g. a death of a spouse or an applicable life change, or age of a beneficiary.

Questions? Reach out to one of our professionals at BECU Trust Services. We can answer any questions about the process and refer you to an attorney to draft your trust. Contact BECU Trust Services at 206-812-5176, or by email at becutrust@becu.org

BECU Trust Services is a trade name used by MEMBERS® Trust Company under license from BECU. Trust services are provided by MEMBERS® Trust Company, a federal thrift regulated by the Office of the Comptroller of the Currency. This is for informational purposes only and is not intended to provide legal or tax advice regarding your situation. For legal or tax advice, please consult your attorney and/or accountant. Trust products not federally insured, not subject to credit union or affiliate guarantee, and may lose value.