What's an Irrevocable Trust?

Trusts are established to provide legal protection for a person’s assets, and to ensure those assets are distributed according to that person’s wishes. Depending on factors such as age, financial situation, and special needs of your beneficiaries, you might find an irrevocable trust to be necessary.

Irrevocable vs. Revocable Trusts

While a revocable living trust allows changes after the terms have been finalized, an irrevocable trust is simply the opposite – it cannot be modified or terminated after it's been signed. Additionally, once an asset (such as investments, cash, or insurance policies) has been gifted as part of the trust, that gift cannot be revoked.

The benefits of an irrevocable trust:

Provides financial management for minor beneficiaries
Protects a beneficiary's inheritance from reckless spending habits
Takes advantage of the estate tax exemption. Allows gifts to any children under favorable tax rules
Supports a disabled beneficiary without disqualifying them from existing benefits

You may also use a trust to create a plan for:

Medicaid protection
Charitable giving
Reducing estate tax
Divorce or creditors

They also have some disadvantages, including:

Requiring you to give up direct control over the assets
Ongoing time and costs for administration of the trust
Possible tax implications involved

Important notes:

To prevent any assets from being misused in an irrevocable living trust, assets can be held and distributed to beneficiaries with conditions attached
You can create an irrevocable trust inside your will or revocable living trust. The irrevocable trust is valid for the life of the beneficiary or until a specific condition is met, e.g. a death of a spouse or an applicable life change, or age of a beneficiary.

Questions? Reach out to one of our professionals at BECU Trust Services. We can answer any questions about the process and refer you to an attorney to draft your trust. Contact BECU Trust Services at 206-812-5176, or by email at becutrust@becu.org