What is an Irrevocable Trust?
An irrevocable trust is a type of vehicle often utilized in Estate Planning in order to protect assets, transfer assets to beneficiaries, or to protect beneficiaries from themselves. However, to understand what an irrevocable trust is, one must first understand what a trust is in estate planning.
A person who creates a trust can be referred to as a grantor, a trustor, or a settlor. Under Texas trust laws, the following are required for a valid trust to be formed:
- The Settlor must have a present intent to create a trust.
- The Settlor must have capacity to convey assets to the trust.
- The trust must comply with the Statute of Frauds.
- The trust must have a legal purpose.
- The Settlor must identify the property covered by the trust and place it in the trust for the benefit of the beneficiary.
- The trust must have a Trustee who holds legal title of property for the benefit of the trust’s beneficiaries.
- The trust must have ascertainable beneficiaries. If the Settlor does not name the beneficiaries with sufficient certainty, the trust will fail.
- The trust may not violate the Rule Against Perpetuities.
Types of Irrevocable Trusts
There are several types of trusts that can be created, as long as the above criteria is met. One type of trust is an irrevocable trust. By design, an irrevocable trust is a trust that cannot be revoked, amended, or changed by the Settlor. This means if the Settlor changes his or her mind, the trust cannot be changed – in theory. However, there are still ways that a trust can be changed despite it being irrevocable, such as:
- Judicial Reformation;
- Judicial or Non-Judicial Conversion;
- Judicial or Non-Judicial Modification;
- Invoking the Trust Protector; or
Depending on the terms of the trust, some of the options may not be available to you. If you find yourself in a situation of needing to amend an irrevocable trust, Contact North Texas Attorney Ronda Haynes for a consultation.