irrevocable trust

An irrevocable trust is a trust you generally cannot change or cancel after you create and fund it. You give up control of the assets you place inside. In return, the trust can serve goals a revocable trust cannot, such as asset protection, estate tax planning or holding life insurance outside your estate.

A round example. For example, a parent places a life insurance policy in an irrevocable trust. The trustee owns the policy and pays out to the children under the trust terms. The death benefit is not counted in the parent's estate when the trust is set up and run correctly. This is a general illustration, not advice.

Trade-offs. You lose flexibility. Rules differ by trust type, and mistakes can be costly. The trust may need its own tax return.

Why it matters to your plan. Some families use irrevocable trusts for charitable goals, special-needs care or to guide how heirs receive money over time. An estate planning attorney should draft it. See our comparison of revocable and irrevocable trusts.