Understanding Irrevocable Trusts: A Comprehensive Guide

An irrevocable trust is a powerful estate planning tool that, once established, cannot be changed or canceled (revoked) by the person who created it, known as the settlor or grantor. This fundamental characteristic means the settlor permanently relinquishes control and ownership of the assets transferred into the trust. The terms outlined in the trust document are fixed and cannot be altered.

Key Characteristics and Legal Definitions:

Legally, an irrevocable trust is defined as a trust that is either explicitly stated as non-revocable within its terms or is considered irrevocable under applicable state law (as per 22 CCR § 50489). Furthermore, federal regulations (26 C.F.R. § 26.2601–1) specify that any trust existing on September 25, 1985, is generally deemed irrevocable unless its terms state otherwise.

Beneficiary Rights and Property Ownership:

The creation of an irrevocable trust has significant implications for the beneficiaries. As highlighted in the case of Empire Properties v. County of Los Angeles (44 Cal.App.4th 781 (1996)), beneficiaries of an irrevocable trust gain a vested and present beneficial interest in the trust property. Unlike a revocable trust, these interests are not subject to being taken away. This distinction is particularly important for property tax reassessment, as the transition of a revocable trust to irrevocable status upon the grantor's death constitutes a change in ownership.

Permanent Transfer of Control:

Once an irrevocable trust is properly established and assets are transferred into it, the settlor loses all rights to possess, control, or dispose of that property. As affirmed in Dudek v. Dudek (34 Cal.App.5th 154 (2019)), the settlor cannot later change their mind or attempt to reclaim the assets. The case of Laycock v. Hammer (141 Cal.App.4th 25 (2006)) further emphasizes this point, stating that any actions taken by the settlor after the trust's creation do not alter its irrevocable nature.

In summary, an irrevocable trust is a binding legal arrangement where the settlor permanently surrenders control over assets placed within it. The trust's terms are unchangeable, providing security and defined interests for the beneficiaries.