Irrevocable Trust
Distinguished from a revocable trust which can be canceled or amended, an irrevocable trust generally cannot be amended except under the most extenuating circumstances and often requiring court approval. Therefore, one must give careful consideration to the consequences of establishing an irrevocable trust.
Despite these cautions, an irrevocable trust can be a very valuable tool in attempting to exclude assets from your taxable estate. The most commonly used irrevocable trust is the irrevocable life insurance trust in which the trustee owns the life insurance policy. The annual premiums are paid indirectly by the insured giving a gift to the trustee who then sends a letter to the beneficiaries to help to qualify the gift for the federal gift tax annual exclusion amount. Then the trustee uses the gifted money to pay the life insurance premium.
We have prepared many irrevocable life insurance trusts and and have lectured on this type of trust to graduate students in taxation on multiple occasions.
Knowing your situation and the tax laws enables us to advise whether the irrevocable trust is right for you.