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irrevocable trusts

March 21, 2022

John Brennan, Senior Vice President of Trust and Financial Services at Cape Ann Savings Bank, talks with John Maher about irrevocable trusts. He explains why people use them, the types, and the differences between irrevocable and revocable trusts.

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Podcast Transcription:

Transcription Disclosure: Below is a transcript of the conversation between John Maher and John T. Brennan. Please note, this is an unedited "word for word" rendition of the actual conversation and is not intended to be grammatically correct.

John Maher: Hi, I'm John Maher and I'm here today with John Brennan, Senior Vice President of Trust and Financial Services at Cape Ann Savings Bank in Gloucester, Massachusetts. Today our topic is irrevocable trusts. Welcome John.

John Brennan: Hi John.

What Is an Irrevocable Trust?

John Maher: So John, what is an irrevocable living trust?

John Brennan: Well, I'll start out John by saying that, you usually don't insert the term living when you say irrevocable living trust. Typically, you say revocable living trust because it's applicable to someone who's still alive and somebody who has the ability to revoke a trust. An irrevocable trust is theoretically, not revocable. So it really wouldn't have the term living inserted. It would just be an irrevocable trust as opposed to a living trust.

How Do You Create an Irrevocable Trust?

John Maher: Okay. So how do you go about creating an irrevocable trust?

John Brennan: Well, just as you would create a revocable trust with an attorney's help by writing out the trust and listing the circumstances that will act on the property for the beneficiary's benefit, you create it with an attorney's help. And then what happens is, when you fund it and when you sign it and you make it real, which is really by funding it, by giving it property to act upon, that irrevocable trust becomes its own entity. It gets its own Social Security number, and it is now its own entity. Like I say, think of it as a living thing that exists separate and independent from the individual who created it.

Pros and Cons of an Irrevocable Trust

John Maher: So tell me a little bit about the pros and cons of an irrevocable trust.

John Brennan: Well, the pros of an irrevocable living trust, which might not seem transparent at first, is that it creates that independence and it creates that distinction from the individual who created it. Because sometimes, you might have a reason to give your property away. And I think we'll probably get to that in another question. But the pro is that you're able to really create something separate, create something independent.

The cons are it's much harder to change an irrevocable trust. It requires more scrutiny. It requires all parties who have an interest in the trust, acting in concert. It potentially requires a trip to the probate court and a judge signing off any change. So once you have an operational irrevocable trust, it's much more challenging to make it do something besides what the trust says.

Reasons to Use Irrevocable Trusts

John Maher: So tell me a little bit about some of the circumstances in which people tend to create irrevocable trusts and what the different types of irrevocable trusts are?

John Brennan: Sure. Well, some of the reasons why you might create an irrevocable trust is you might have a case where a donor or a property owner wants to protect property from creditors. So they gift that property to a trust. And that trust operates on the property. Somebody comes calling and says, "Hey, you owe me money." You can say, "Well, I gave that to my trust. I don't own it anymore." You see irrevocable trusts used sometime in the Medicaid context, and that is an asset protection. It's a means of asset protection, often when people are going into nursing homes… this is a whole kettle of fish. We could talk at length about Medicaid and asset protection trusts and the use of those trusts. But I'll just say that, that's a context where people create an irrevocable trust.

People sometimes create irrevocable trusts if they're concerned about creditors. Now, this can be a little challenging because if you create a trust that's deemed as too self-serving in order to alienate rightful creditors by giving your assets to a trust, the court might see through it and not allow it, but creditor protection is a component of these types of trusts. Another common type of irrevocable trust, and one that is completely legal and useful and used in the estate context is what's called an irrevocable life insurance trust. And I think we'll probably talk about those at length in another podcast, but an irrevocable life insurance trust is a form of irrevocable trust which to your point, that is an irrevocable trust.

Differences Between Irrevocable and Revocable Trusts

John Maher: Okay. We talked about revocable trusts separately, but can you just go into a couple of the details that make irrevocable and revocable trusts different?

John Brennan: Well, the big thing is that these are different types of tools. Irrevocable trusts have a utility when you really don't want to own anything. With the irrevocable life insurance trust, when we talk about those, when a trust owns life insurance like that, it literally goes out of somebody's estate. And that's great because somebody could have a life insurance policy on their own life and they pay the premiums through the trust via what's sort of a convoluted process, but they pay the premiums through the trust. The beneficiaries have the good sense not to take the gifted money for premiums that go into the trust. So then when the person passes away, this trust could become the beneficiary of a multimillion dollar life insurance policy. And all those dollars go outside the trust maker or grantor or settler's estate, because all this time the trust has owned the policy. So that's just a good use of an irrevocable trust that's sensible and for a trust maker's benefit.

John Maher: And so, can you kind of summarize this a little bit and just give me your thoughts on irrevocable trusts in general?

John Brennan: Sure. I mean, I would say, Irrevocable trusts.... everybody's trust becomes irrevocable at some point. But, and even recently in Massachusetts, it used to be the assumption was that you created a trust and it was irrevocable. That was just the assumption that the courts applied to any trust. That flipped, I want to say in... I can't remember.... trust history goes back a long time. So, when I say relatively recently, let's call it 50 years. The assumption that a trust you create is irrevocable. But now, I would say most of the trusts which are created are revocable and irrevocable is a useful tool for a time and place, but most trusts probably getting created or that I see getting created are revocable trusts.

Tips for Creating Revocable Trusts

John Maher: Okay. Are there any tips that you have for people when they're creating irrevocable trusts?

John Brennan: No. I think the big thing to remember is that all trusts become irrevocable at some point. Revocable or irrevocable is secondary to what you want your trust to do. The first question, the first query, the first point of analysis is what do you want your trust to do? And then the type of trust, the irrevocability or the revocability will follow depending upon what you need.

Contact Us to Talk About Trusts

John Maher: All right. Well, that's really good information, John. Thanks again for speaking with me.

John Brennan: Sure thing, John.

John Maher: And for more information, you can contact Cape Ann Savings Trust and Financial Services at 978-283-7079 or visit the website at

Investments purchased through the Cape Ann Savings Trust and Financial Services department are not FDIC insured, not FDIC guaranteed, not bank guaranteed, and may lose principal value.

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