Disadvantages of Using an Irrevocable Trust

Maura was puzzled. She and her husband were finally thinking of putting together an estate plan. They had done some online research and stumbled across articles about irrevocable and revocable trusts. The irrevocable trust seemed to offer the kind of asset protection they wanted. However, she knew there had to be disadvantages to using any estate planning tool.

What is an irrevocable trust?

Every trust has at least three parts:

  • The settlor, who creates and funds the trust.
  • The trustee, who manages the trust assets.
  • And the beneficiaries, who receive benefits from the trust.

The trust document signed by the settlor dictates the trust’s terms.

Trusts are either revocable or irrevocable. Revocable, of course, means the trust can be changed. Irrevocable trusts, on the other hand, are difficult or impossible to change. This type of trust, however, does offer benefits like:

  • Asset protection,
  • Tax advantages, and
  • Multi-generational estate planning.

However, nothing is perfect. There are some disadvantages to setting up and funding an irrevocable trust.

Why should I hesitate before setting up an irrevocable trust?

When considering whether to use an irrevocable trust, keep the following in mind:

  • The settlor, the person who creates the trust, does lose control over the assets transferred to the trust.
  • Transferring all your assets to an irrevocable trust could leave you with cash flow problems.
  • The trust may not accomplish your goals. For example, Maura may want her irrevocable trust to help with future Medicaid eligibility. If laws change after she established the trust, she may find the trust to be more of a disability than an asset.
  • Other estate planning options may provide asset protection without being irrevocable.

Like any other estate planning tool, it’s important to know how the advantages and disadvantages relate to your circumstances.

Is an Irrevocable Trust Right for You?

Maura and her husband decided to use several trusts – including one irrevocable trust – to meet their estate planning needs. Fortunately, they consulted with an attorney who knew the consequences of using the wrong trust.


Revocable Vs. Irrevocable Trusts

What Are The Key Differences Between A Revocable And Irrevocable Trusts?

Does A Revocable Living Trust Really Protect The Settlor’s Assets? The Answer May Surprise You

Is There A Way To Modify Or Terminate An Irrevocable Trust?

5 Reasons To Have Your Revocable Living Trust Regularly Reviewed

What Happens To A Trust After Death?

Do You Need A Trust Protector?

How To Choose The Right Trust

Understanding Domestic Asset Protection Trusts

Best Places To Establish A Domestic Asset Protection Trust

Benefits To Establishing A Florida Land Trust

Building Your Legacy Through A Charitable Remainder Trust

Will A GRAT Help Fund Your Retirement?

Advanced Estate Planning: Is It Right For You?

John Mangan is an experienced Florida estate planning attorney who has been board certified in Wills, Trusts & Estates by the Florida Bar. At the Law Offices of John Mangan, P.A., we have assisted many clients in developing comprehensive estate plans that meet their needs. Call us at 772-324-9050 to set up an appointment or use our convenient Contact Form.

Written by John Mangan, Esq.

John Mangan, Esq.

I’m an attorney in Palm City, FL, and I serve clients throughout Martin County, including Stuart, Palm City, Hobe Sound, and Indiantown, as well as those in St. Lucie County, the Treasure Coast, Palm Beach County, and other parts of Florida. The Law Offices of John Mangan, P.A., is an innovative firm providing estate planning services to clients in Florida. We focus primarily on wills, trusts, asset protection, guardianship, and probate administration.