Done right, irrevocable trusts are powerful estate and business planning tools that accomplish a variety of goals. But what are they, really? And once formed, are they well and truly irrevocable?
The Nuts and Bolts of the Irrevocable Trust
The first step in understanding irrevocable trusts is knowing what people mean when they refer to a trust – revocable or irrevocable. Some people have difficulty understanding trusts because a trust is not a tangible thing. You can't touch it or hold it. A trust is actually a legal entity that is controlled by a trust agreement, which is a written document setting forth all the terms of the trust, including how it is administrated.
To understand how a trust works, it helps to think of the trust as a box. When someone creates a trust, he or she...