What is an irrevocable trust & how does it work?

A trust you can't change, except under certain legal circumstances

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Elissa SuhSenior Editor & Disability Insurance ExpertElissa Suh is a disability insurance expert and a former senior editor at Policygenius, where she also covered wills, trusts, and advance planning. Her work has appeared in MarketWatch, CNBC, PBS, Inverse, The Philadelphia Inquirer, and more.

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In addition to writing a will, you might also place your assets into a trust, a legal entity with rules as to how your belongings and property are distributed to your future heirs. The trustmaker, also known as the trustor or grantor, establishes the terms of the trust, like who the beneficiaries are and what assets are distributed to them. An irrevocable trust is one that cant be revoked, meaning it cant be changed, modified, or canceled, except under certain circumstances.

Deciding to open an irrevocable trust as part of your estate plan can feel like a gamble, since the terms are mostly set in stone. However, irrevocable trusts come equipped with many advantages, like tax benefits and asset protection, that can make getting one worthwhile for some people. 

Key takeaways

  • The grantor cant change an irrevocable trust unless narrow conditions are met and the court approves

  • You typically need to hire an estate planning attorney to create an irrevocable trust

  • The main benefits of an irrevocable trust are minimizing taxes, protecting assets, and helping a trust beneficiary to qualify for government benefits, which you can’t get with a revocable trust

  • Both a revocable and irrevocable living trust can help your future heirs receive an inheritance outside of the probate process

How does an irrevocable trust work?

The person who makes the trust, called the trustor, settlor, or grantor, establishes the trust through a document called a trust agreement. 

A strong estate plan starts with life insurance

They choose beneficiaries of the trust, who can be family, friends, or entities like businesses and nonprofit organizations. They also choose a trustee to manage the trust, and the trustee can be one of the beneficiaries — but not the grantor.

Next the trust is funded with property, and eventually the trust assets will be distributed according to the plan laid out in the trust document. Before then, the terms of the trust can’t be changed.

Irrevocable living trusts are created during the grantor’s lifetime. If you write a will that instructs your assets to be placed into a trust when you die, this would be an example of a testamentary trust. Its also irrevocable, by nature, since the grantor wont be able to make any changes because theyre no longer alive.

The grantor doesn’t own irrevocable trust property

When you transfer your assets into an irrevocable trust, you relinquish, or give up, control of them. The trust now legally owns the assets, which have been retitled or registered in the trusts name, and since the trust property is no longer yours it will have no bearing on the value of your estate or your personal tax liability.

In fact, the trust is governed by its trust agreement and even has its own tax identification number (EIN). The trustee is responsible for paying any taxes owed by the irrevocable trust with the trust funds. Well discuss the tax advantages more in depth later.

Additionally, when the trust is properly structured and managed, you cant be asked or forced to give up irrevocable trust assets if youre sued since you dont legally own them. Theyre also shielded from recovery for long-term care expenses. (But if there are current creditors with a claim to assets, moving them to a trust won't protect you. The move would be considered a fraudulent transfer.)

Learn more about who owns property in a trust

Changing an irrevocable trust can be hard

You can only alter an irrevocable trust when your state law allows. For example, you might be able to make changes if trust assets arent enough to justify the cost of administering the trust, or the trust doesnt conform to your original intentions when you set out to create it. Typically you need permission from all beneficiaries in order to make a change or to do something more drastic like dissolving the trust altogether.

In some states, you won’t be able to terminate the trust even with consent under certain circumstances (like if the trust has a spendthrift clause in place, where a trustee disburses the assets over time, so the heirs dont spend everything at once).

Other states, like Virginia and New Hampshire, allow changes to an irrevocable trust by a decanting. This is the process of creating a new trust with updated terms, then transferring, or decanting, the property from your existing trust into the new one.

Learn more about how to amend a living trust

Benefits of an irrevocable trust

Irrevocable trusts are difficult to change, but in exchange there are some key advantages. You might benefit from getting an irrevocable trust if:

  • You want to minimize your taxes (estate and gift tax, income tax, etc.) because you’re a high-net–worth individual.

  • You want to provide for a child or dependent who has a disability and help them qualify for government assistance.

  • You need asset protection because you work in a profession where you’re liable to be sued.

Irrevocable trusts can be a great estate planning tool, but you’ll likely need to hire a legal professional like an estate attorney to help establish one. 

On the other hand, if you generally just want a safe way to pass assets to your beneficiaries, or to have something in place to distribute your property in case you become incapacitated, a basic revocable trust might meet your needs. 

Read our guide on how to set up a trust in just six easy steps

Revocable vs. irrevocable

The opposite of an irrevocable trust is a revocable one, which lets you freely make changes to it up until you die. Both a revocable and irrevocable living trust can ensure your assets are passed down to trust beneficiaries while avoiding probate. You can also distribute funds incrementally or restrict how much a trust beneficiary can receive, like if they’re a spendthrift, with either type of trust.


Revocable trust

Irrevocable trust

Remove or retitle assets



Rename beneficiaries



Protection from creditors



Tax shelter (estate tax, capital gains tax)






The grantor usually acts as the trustee of a revocable trust (which is why revocable trusts are also known as grantor trusts), and when they die an appointed successor trustee will take over trust management duties. When you transfer assets into a revocable trust, you still legally retain ownership over the property for tax and legal purposes, so you won’t get the same sheltering tax benefits of an irrevocable trust. Revocable trusts become irrevocable after the grantor passes away.

Learn more about a revocable vs. irrevocable trust

Types of irrevocable trust

Most trusts that have a special feature are irrevocable living trusts. Here are the most common examples:

A charitable trust lets the grantor transfer trust assets to a charitable organization and receive a tax deduction in return.

With an irrevocable life insurance trust (ILIT), the trust acts as the owner of a life insurance policy, allowing the grantor to reduce their taxable estate.

An asset protection trust shields the grantor’s assets against creditors, liens, and judgments, while allowing them to access trust funds. 

With a special needs trust, you can help a beneficiary who has a disability qualify for government benefits like supplemental security income (SSI), which comes with income-eligibility restrictions. 

A Medicaid trust can help the trust grantor qualify for Medicaid in order to get nursing home or assisted living covered and also protect their assets from being taken during Medicaid estate recovery

Other irrevocable family trusts, like a bypass trust, QTIP trust, and grantor-retained annuity trust (GRAT), can help the grantor leave assets for family members and future heirs while reducing taxes for them.

Learn more about other types of trusts

Irrevocable trusts and taxes

One of the biggest advantages of an irrevocable trust are netting tax benefits for the grantor. Irrevocable trusts reduce the size of the grantor’s taxable estate, which in turn help them to minimize how much taxes are paid.  But in order to actually make use of these benefits you'll probably need to have a very large estate, so an irrevocable trust may only be most helpful for very wealthy individuals.

Income and capital gains tax

Trusts owe tax any time trust property earns income. With a properly constructed irrevocable living trust, the grantor can avoid claiming any income and assets on their individual tax return. The irrevocable trust is responsible for paying its own taxes via the trustee. 

Similarly, when you realize a profit on an investment you experience a capital gain, which is often accompanied by a tax. If you sell assets in a revocable trust, you will have to report any capital gain on your personal income tax return and pay any applicable taxes. You can avoid paying the capital gains tax by opening an irrevocable trust, which will act as a separate entity that sells the assets and pays the appropriate taxes instead.

Learn more about how trusts are taxed

Estate tax

When you die the executor will assess the size (or worth) of your estate. Larger estates will have to pay an estate tax — a federal estate tax and possible state estate tax will diminish how much money your beneficiaries and heirs ultimately receive. An irrevocable trust may help lower the total value of the grantor's estate so that it is below the exemption limit and free of the hefty federal estate tax charge. This is one of its key advantages over a revocable trust.

For 2024 the estate tax exemption is $13.61 million. Avoiding it is mostly useful for individuals with a high net worth, whose assets and wealth fall above this threshold. (The estate tax exemption was more than doubled after the passage of the Tax Cuts and Jobs Act. However, this limit will lapse in 2025, unless it is renewed by Congress.)

Tax deductions

If youre funding a charitable trust, you can receive tax deductions while you are still alive when you transfer the assets into this irrevocable living trust. If the assets are not transferred into the trust until after your death, then your estate can receive the deduction instead.

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