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Simple English definitions for legal terms
irrevocable trust
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A quick definition of irrevocable trust:
Irrevocable trust: A type of trust where the person who creates it cannot change or end it once it's made. This can be helpful for avoiding taxes or protecting assets from creditors. It's important to use the right words in the trust document to make it irrevocable. Even though it can't be changed, an irrevocable trust can be useful for managing and distributing assets over time. To make sure it's done right, it's best to talk to a specialist in trusts.
A more thorough explanation:
An irrevocable trust is a type of trust where the person who creates it, called the grantor, cannot change or end the trust after it has been created. This type of trust is often used to limit estate taxes or to protect assets from creditors.
For example, if someone wants to avoid estate taxes, they may put their assets into an irrevocable trust. This means that the assets cannot be counted as part of their estate when they die, which can reduce the amount of taxes their heirs have to pay. Another reason someone might use an irrevocable trust is to protect their assets from creditors. If someone is sued, their assets in an irrevocable trust may be protected from being taken by the person who sued them.
It's important to note that once an irrevocable trust is created, it cannot be changed. This means that the grantor cannot take back the assets they put into the trust or change the terms of the trust. However, the grantor can choose a trustee to manage the assets and distribute them according to a set of guidelines over time.
Creating an irrevocable trust requires following specific state and federal rules, so it's important to consult with a specialist in trusts to ensure that the trust is created correctly.