Irrevocable Trust basically means an unchangeable or irreversible or unmodified trust by the grantor who has already signed to set up the trust in the first place. This kind of trust is generally issued when one wants to avoid the estate taxes or protect his/her assets from ending up in the wrong hands.
Through this trust, grantors actually renounce control or power and ownership of that particular asset so that it automatically generates a discrete tax entity. In that way, the trustee who is managing the trust has to pay its own taxes. The policy of this trust is when the grantor dies, the beneficiaries will have the ownership of those assets.
For example, Ashton is the owner of the property - x. He chose to set up an irrevocable trust since he is now going through a financial problem but also wants to protect his possessions for his children. As a result, he is exempt from paying taxes because he has no authority over the property.
After some time, even if he goes all broke and desperately needs money, he won't be able to reclaim possession of that particular property since the trust is irrevocable. Nevertheless, it will be passed down to his children without fail after he dies via the trustee.
Use of the Term in Sentences
- An irrevocable trust is a term that relates to a trust that cannot be adjusted or amended once it has been signed, and it has both benefits and drawbacks.
- A revocable trust can be altered or modified according to the grantor's plans and decision but it doesn't have the advantage of protecting the asset as irrevocable trust does.
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