25 Jun Advantages & Disadvantages of an Irrevocable Trust
When you’re looking to protect your assets for future generations, calling on the expertise of an estate planning lawyer is a smart idea. At Phelps LaClair Firm we’ve been helping families in the Phoenix Valley choose the right estate planning vehicle for their needs for more than 40 years. In the past, we’ve written a lot about revocable living trusts and their many benefits. However, in today’s post, we’d like to discuss the advantages and disadvantages of an irrevocable trust.
What Is an Irrevocable Trust?
An irrevocable trust is one in which the grantor—the person who created the trust—relinquishes all ownership and control over the assets within the trust. Once the assets are transferred into an irrevocable trust, the trust becomes the owner. However, an irrevocable trust can never be amended or terminated, except in a few very rare circumstances.
As is the case with other trusts, the grantor who sets up an irrevocable trust will name a trustee (the person who will manage the trust) and at least one beneficiary (the person for whom the trust is created). After an asset is placed into an irrevocable trust it becomes a gift to the trust and cannot be revoked. Even so, the grantor can still dictate the terms of the trust and how its assets should be used or distributed.
What Are the Disadvantages of an Irrevocable Trust?
We’ll start with the disadvantages, because the main drawback is glaringly obvious: an irrevocable trust cannot be changed or revoked. Once the terms are set and the beneficiary is chosen, it’s a done deal.
- Loss of control—Once the grantor places assets within an irrevocable trust they can no longer control or manage them.
- Unforeseen changes—If the grantor falls on hard times, they cannot sell the assets in an irrevocable trust to regain financial security.
What Are the Advantages of an Irrevocable Trust?
Despite these disadvantages, there are several significant advantages of transferring assets into an irrevocable trust.
- Taxes—The primary reason people set up irrevocable trusts is for estate and tax considerations. Since this type of trust effectively removes ownership of all assets placed within it from the grantor’s estate, it exempts those assets from the estate tax. Very large estates that have a large tax liability may find irrevocable trusts beneficial.
- Generational planning—The terms and conditions that a grantor can place on assets within an irrevocable trust can protect them from divorce or mismanagement.
- Lawsuit & debt protection—Another huge benefit of the irrevocable trust is that its assets are protected against any lawsuits or creditors that may come after the grantor’s estate. This can be particularly beneficial to individuals in litigious professions, such as the medical or legal fields.
- Government benefit eligibility—An irrevocable trust allows for the transfer of property ownership to the trust, which in turn, may enable the grantor to qualify for government benefits such as Medicare and social security.
Meet with an Estate Planning Attorney in Scottsdale
At Phelps LaClair, your first consultation is always free! We’ll help you choose the best estate planning tools, based on your unique asset portfolio and risk analysis. We also offer a free Lifetime Service Package, which includes an in-person review with an attorney every three years. Don’t leave your legacy in the balance—contact us today!
Photo by Jeremy Alford on Unsplash used with permission under the Creative Commons license for commercial use 8/27/25.