Irrevocable Trusts
Unlike a revocable trust, an irrevocable trust generally cannot be modified or terminated without the permission of the beneficiaries or a court order. You give up control to gain significant legal and tax benefits.
Why Give Up Control?
1. Asset Protection
Because you no longer own or control the assets in the trust, future creditors or lawsuits generally cannot reach them. (Note: You cannot move assets to defraud *existing* creditors).
2. Medicaid Planning
Nursing homes cost $8k-$10k+ per month. Medicaid will pay, but only if you have almost zero assets. By placing assets in an irrevocable trust 5 years before you need care (the look-back period), those assets don't count toward Medicaid limits.
3. Estate Tax Reduction
Wealthy individuals use irrevocable life insurance trusts (ILITs) or other irrevocable vehicles to remove the value of those assets from their taxable estate.
The Role of the Trustee
Because you must surrender control, you usually cannot be the trustee of your own irrevocable trust. You must appoint an independent third party, such as an adult child, a trusted friend, or a corporate trustee (like a bank).