Long-term protection
A trust designed to hold firmCareful planning up front, fewer problems later.
An irrevocable trust is generally harder to change once it is signed, and that permanence is the point. It can move assets out of your direct control, which may help with asset protection, certain tax planning, benefits planning, or providing for a beneficiary who needs structure.
Because these trusts are difficult to undo, the drafting has to be right the first time. We review your goals, assets, and family situation, explain the trade-offs in plain language, and coordinate the trust with the rest of your plan. If you already have an irrevocable trust and need to know your options, our article Can an Irrevocable Trust Be Changed in Colorado? is a good starting point.
Long-Term Protection & Stability
What Is an Irrevocable Trust?
An irrevocable trust is a legal arrangement where a person (known as the grantor or settlor) transfers ownership of assets into a trust that is managed for the benefit of designated beneficiaries.
Once assets are transferred into the trust, the grantor generally gives up ownership and direct control over those assets. Unlike a revocable trust, these assets are generally no longer considered part of the grantor’s personal estate.
Real Estate & Property
Real estate, vacation homes, family farms, and mineral rights.
Investments & Cash
Investment accounts and cash held for designated beneficiaries.
Business Interests
Business ownership interests transferred as part of succession planning.
Insurance & Collectibles
Life insurance policies and valuable collectibles preserved for future generations.
Benefits of an Irrevocable Trust
Goals Other Tools Can’t Reach
Irrevocable trusts are used because they can accomplish planning goals that other estate planning tools cannot. The benefits available depend on the type of trust and your individual circumstances.
- Asset protection
- Probate avoidance for trust assets
- Estate tax planning
- Long-term care planning
- Wealth preservation
- Protection for children and grandchildren
- Protection from financial mismanagement
- Business succession planning
- Charitable giving opportunities
- Greater control over how inheritances are distributed
Asset Protection & Tax Planning
Because assets are generally no longer personally owned by the grantor, irrevocable trusts may provide protection from certain future creditors and lawsuits. Planning should always occur before legal claims arise.
Although relatively few families owe federal estate taxes today, irrevocable trusts remain valuable tools for larger estates. Certain trusts can remove appreciating assets from a taxable estate.
- Protection from certain future creditors
- Removing appreciating assets from a taxable estate
- Medicaid and long-term care planning
- Business succession and family harmony
Protecting Beneficiaries
Rather than leaving an inheritance outright, an irrevocable trust can protect beneficiaries from a range of risks. The trustee distributes assets according to the instructions contained in the trust.
- Divorce
- Creditors
- Lawsuits
- Financial exploitation
- Poor spending habits
Business owners also use irrevocable trusts to transfer ownership, reduce family conflict, and preserve businesses for future generations.
How Does an Irrevocable Trust Work?
Four Steps to a Funded Trust
Creating an irrevocable trust generally involves four steps, from drafting the trust to ongoing administration by your trustee.
Create the Trust
An estate planning attorney prepares a trust tailored to your financial goals and family circumstances.
Choose a Trustee
The trustee manages the trust according to its terms. A trustee may be a trusted family member, a close friend, a professional fiduciary, or a bank or trust company — with a fiduciary duty to act in the beneficiaries’ best interests.
Transfer Assets Into the Trust
The trust is not effective until it is properly funded — recording new deeds, assigning ownership interests, retitling investment accounts, updating beneficiary designations, and transferring business interests.
Ongoing Administration
The trustee manages trust assets, makes distributions, keeps records, and complies with any required tax reporting.
Updating Your Plan
Can an Irrevocable Trust Be Changed?
Many people believe an irrevocable trust can never be changed. In reality, Colorado law provides limited circumstances where modifications may be possible. Depending on the trust and applicable law, changes may occur through:
- Court approval
- Agreement among interested parties
- Trust decanting
- Authority granted to a trust protector
- Other legal mechanisms
Every trust should be reviewed individually before determining whether modifications are available.
Trust Property
Can Assets Be Removed From an Irrevocable Trust?
Usually, assets transferred into an irrevocable trust remain trust property. Whether assets can be removed depends upon the language of the trust, trustee authority, court approval, Colorado law, and the trust’s purpose.
Because transferring assets into an irrevocable trust is generally intended to be permanent, careful planning is essential before funding the trust.
- Plan carefully before funding
Types of Irrevocable Trusts
Several Trusts, Different Goals
Several different types of irrevocable trusts exist, each designed for specific planning objectives.
- Irrevocable Life Insurance Trust (ILIT)
Owns life insurance policies outside of the taxable estate.
- Special Needs Trust
Provides financial support while helping preserve eligibility for certain government benefits.
- Charitable Trust
Allows individuals to support charitable organizations while accomplishing estate planning goals.
- Asset Protection Trust
May help shield assets from certain future creditor claims when properly established.
- Medicaid Asset Protection Trust
Designed to preserve certain assets while planning for future long-term care costs.
- Generation-Skipping Trust
Allows wealth to pass efficiently to future generations while addressing certain tax planning objectives.
Is It Right for You?
Is an Irrevocable Trust Right for You?
An irrevocable trust may be appropriate if you fall into any of the following situations. Every estate plan should be customized to meet your family’s unique needs.
- Own a business
- Have significant investments
- Own multiple properties
- Want to preserve family wealth
- Have blended family concerns
- Wish to protect children or grandchildren
- Are planning for long-term care
- Have estate tax concerns
- Want greater control over inheritances
FAQ
Common questionsStraight answers about your situation.
What is the difference between a revocable and irrevocable trust?
A revocable trust can generally be changed during your lifetime. An irrevocable trust is intended to be permanent and is much more difficult to modify.
Do irrevocable trusts avoid probate?
Assets properly transferred into an irrevocable trust generally pass outside of probate.
Can I serve as trustee?
In some situations, yes. However, many irrevocable trusts work best when managed by an independent trustee.
Are irrevocable trusts only for wealthy people?
No. Many middle-income families use irrevocable trusts for asset protection, long-term care planning, and protecting inheritances.
Can an irrevocable trust own a business?
Yes. Business ownership interests are commonly transferred into irrevocable trusts as part of succession planning.
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This page provides general information about Colorado law, not legal advice for your situation. Every case is different, and past experience does not guarantee a particular outcome.