Generally, an irrevocable trust is a type of trust that cannot be changed after it becomes irrevocable without the approval of all the beneficiaries. The trust can be irrevocable at the time of its creation or at another point in time, such as at the death of the trust creator. Irrevocable trusts can be less flexible than a revocable trust but can provide some added benefits such as estate tax reduction, asset protection, charitable estate planning and Medicaid planning.
If your estate has the possibility of exceeding the federal estate tax exemption limits ($5.45 million per person as of 2015) then you may consider some type of irrevocable trust planning such as an irrevocable life insurance trust (ILIT). Premiums can be paid for the insurance benefit and then the proceeds are not in the taxable estate at the time of death. Sometimes the proceeds are used to pay the estate tax.
Irrevocable trusts can also be used to protect assets from nursing home expenses, if assets are placed in an irrevocable trust five years prior to applying to Medicaid, and all other conditions are met.
Regarding asset protection, the State of Utah allows for a self-settled asset protection trust. A self-settled trust is where the trust creator or grantor is also a beneficiary. Assets in the trust can be protected against creditors and lawsuits. Traditionally this was NOT allowed in the State of Utah but the laws changed in 2013. There are certain criteria for this to work and can be highly complex. This type of trust can be beneficial for professionals (doctors, lawyers, accountants, etc.) that have the potential of being sued.
Irrevocable trust planning is complex and should be set up by an attorney.
