The term “Trust Fund” often evokes images of the Kennedys, Rockefellers, and Du Ponts sheltering their vast fortunes from the grasp of the government. This popular trust is referred to at the Irrevocable Living Trust.
If a Revocable Living Trust is a wallet, think of the irrevocable trust as Fort Knox; it’s secure, but once the property is inside you can’t just reach in and grab it when you want it. When assets are placed in an irrevocable trust the creator of the trust loses ownership rights in the property and the right to modify or revoke the trust. The primary purpose of the irrevocable living trust was to minimize or eliminate the federal estate tax. Others reasons include insulating wealth from the high expense of medical care and protecting property from creditors.
Irrevocable living trusts were popular throughout the twentieth century, when relatively modest estates were subject to as much as a 77% estate tax. As recently as 2001, estates valued at $675,000 were subject to the Federal Estate Tax. However, as of 2016, estates with a value below $5,450,000 ($10,900,000 for married couples) are not subject to the Federal Estate Tax. Therefore, some primary benefits of the irrevocable living trust are no longer applicable to more than 99% of the population.