Should you create an irrevocable trust?

Irrevocable trusts are not for everyone, and most people will be better served by a revocable trust. If estate planning is your primary goal, and your net worth is not in the multiple millions, then it probably makes more sense for you to create a revocable trust. Revocable trusts are more flexible, less expensive, and easier to maintain than irrevocable trusts. There are generally three reasons when I would recommend considering an irrevocable trust.

1. Asset protection – By moving an asset to an irrevocable trust, you permanently give up your ownership and control of the asset, which makes the asset invisible to your personal creditors. A court cannot force you to use the assets owned by the trust to pay off a lawsuit or debt. If you have a high net worth and you work in a profession that could open you up to lawsuits, such as a doctor, then an irrevocable trust is a great option to protect your assets.

2. Taxes – Moving assets into an irrevocable trust is a way to remove assets from your taxable estate. This becomes very beneficial to avoid taxes at death if your net worth is north of $15 million or $30 million for a married couple (in 2026). If you pass away in 2026 with an excess of $15 million (or $30 million if you are married) in your individual name, you are likely to be taxed at 40% on the excess. You can avoid the steep estate tax by using an irrevocable trust.

3. Government benefits – If you have a high net worth, you could be barred from receiving certain government benefits, such as Medicaid, which can help pay for nursing home or in-home care. Moving your assets into an irrevocable trust could separate the assets from your net worth and help you qualify for government benefits.

Overall, irrevocable trusts can be a useful tool depending on your circumstances. If you do not have a net worth of multiple millions, an irrevocable trust is probably not necessary, and you will probably be better served by a revocable trust if you are concerned with estate planning. If your goals include asset protection, reducing taxes for your large estate, or qualifying for certain government benefits, then an irrevocable trust can be an effective option.