What Is an Irrevocable Trust and How Does It Work?
An Irrevocable Trust is a legal arrangement where the grantor transfers assets into the Trust and relinquishes ownership and control. Once the Trust is created, it generally cannot be modified or revoked without the consent of the beneficiaries.
This permanence provides unique advantages:
- Asset Protection – Assets are no longer part of your personal estate.
- Tax Efficiency – Trusts can reduce estate taxes and transfer wealth more effectively.
- Medicaid Planning – Properly structured Trusts can protect assets from spend-down rules while preserving long-term care eligibility.
Types of Irrevocable Trusts Explained
Each Irrevocable Trust serves a specific purpose. Choosing the right one depends on your goals:
- Family Irrevocable Trust – Holds family assets for transfer to future generations.
- Medicaid Asset Protection Trust – Shields assets from Medicaid spend-down, preserving them for heirs.
- Irrevocable Life Insurance Trust (ILIT) – Keeps life insurance proceeds outside your taxable estate.
- Charitable Remainder Trust (CRT) – Lets you support a charity while receiving income during your lifetime.
At Douglass & Runger, we’ll help you determine which type of Trust best fits your financial strategy and family needs.
Tax Advantages of Irrevocable Trusts for Families
Irrevocable Trusts come with specific rules you must understand before committing:
- Loss of Control – You no longer directly manage assets placed in the Trust.
- Beneficiary Consent – Changes typically require approval from all beneficiaries.
- Taxation – Depending on structure, Trust income may be taxed to the Trust, the beneficiaries, or both.
Our attorneys work closely with you to minimize tax burdens and maximize the long-term benefits of your Trust.
Trustee Responsibilities in Irrevocable Trust Administration
An irrevocable trust is only as strong as the person or entity administering it. Trustees must:
- Act with fiduciary duty in the beneficiaries’ best interests
- Manage and prudently invest trust assets
- Oversee income and principal distributions according to trust terms
- File trust tax returns and manage compliance obligations
We advise both grantors and trustees, ensuring the trust runs smoothly and lawfully for years to come.
Irrevocable Trust vs. Revocable Trust: Key Differences
- Revocable Trust: Flexible, allows you to change or revoke it anytime. But assets remain part of your estate and are vulnerable to creditors and estate taxes.
- Irrevocable Trust: Permanent, less flexible, but provides strong asset protection and tax advantages.
Your circumstances will determine which is right for you. We’ll help you weigh flexibility against protection so you can make the best choice for your family.
How Our Shelby County Estate Planning Attorneys Can Help
- Decades of estate planning experience in Tennessee.
- In-depth knowledge of asset protection and tax strategies.
- Compassionate, client-focused approach, we explain complex law in plain English.
- A trusted reputation in Shelby County for protecting families’ legacies.
At Douglass & Runger, our promise is simple: Listen. Strategize. Protect.
Take the Next Step
An irrevocable trust is more than a document; it’s a safeguard for your family’s future. With the right plan, you can rest easy knowing your wealth is protected and your wishes will be honored.
📞 Call us today at (901) 388-5805
👉 Or schedule your session
Secure your assets. Protect your family. Preserve your legacy.
