Future Business Leaders of America (FBLA) Agribusiness Practice Test

What happens to the control of assets in an irrevocable trust?

1. The grantor retains full control

2. The grantor must relinquish control over the assets

3. The assets are managed by an external party

4. Control reverts back to the grantor after a year

The correct answer is: The grantor must relinquish control over the assets

In an irrevocable trust, the grantor must relinquish control over the assets. This type of trust is designed to transfer ownership of the assets to the trust, making them no longer part of the grantor’s estate. Once the assets are placed in the trust, the grantor cannot alter the terms of the trust, dissolve it, or reclaim the assets. This characteristic is what distinguishes irrevocable trusts from revocable trusts, where the grantor maintains the ability to control and modify the terms. In the context of asset management, it is typically an appointed trustee who oversees the trust and manages the assets according to the trust's terms. This structure helps to provide benefits such as estate tax advantages, protection from creditors, and ensuring that the assets are distributed according to the trustor’s wishes after their passing.