First, an Irrevocable Trust is a trust where the grantor cannot change or revoke the terms of the trust. The grantor has given up control over that particular portion of the grantor's estate. This makes it difficult for creditors to reach assets held by Irrevocable trusts since they no longer own them.
Second, Irrevocable trusts are often used to distribute assets outside of probate so that if someone dies, their creditors do not lay claim to their entire estate. Finally, irrevocable trusts can be set up to allow for a certain amount of trust assets to pass free of federal gift or estate taxes, a key aspect in most family's planning. The Irrevocable Trust is an excellent tool for asset protection because it makes it very difficult, if not impossible, for creditors and plaintiffs to reach the assets held in the Irrevocable Trust.
For creditors or plaintiffs with claims against you to get at Irrevocable Trust assets, they must attack the Irrevocable Trust itself, which can be costly and time-consuming. Attacking an Irrevocable trust requires significant legal knowledge about how Irrevocable trusts work, something few attorneys outside of probate litigation know much about. Irrevocable trusts are often used as a tool to avoid probate on large estates but can also be used to reduce estate taxes and protect assets from creditors.
Irrevocable trusts are irrevocable, meaning that they cannot be undone by the grantor or anyone else after the trust has been created. Irrevocable trusts provide asset protection because once you transfer assets into the Irrevocable Trust; those assets are no longer considered your assets for legal purposes. This means that if someone sues you personally (not the Irrevocable Trust), you cannot lose Irrevocable Trust assets even if you owe money or go bankrupt.
We use a variety of tools to solve this problem, depending on the circumstance, such as:
Limited Partnerships, family Limited Liability Companies, and others
Domestic asset protection trusts
Hybrid domestic and foreign asset protection trusts
Spousal lifetime access trusts
Other Irrevocable Trusts