Irrevocable trusts are very similar to contracts and for most intents and purposes, they are the same as contracts. However, trusts are governed by different laws than contracts and also require different elements for their formation. Therefore, while an irrevocable trust is similar to a contract, it is also different in many ways. Rather than calling an irrevocable trust a contract, it is better to refer to both contracts and trusts as agreements.
Elements of a Contract
The elements of a valid contract include an offer, acceptance, capacity, consideration and performance. Sometimes other elements apply, depending on the situation. Basically, the parties must be able to contract, come to an agreement as to the terms of the contract, exchange something of value and actually perform under the agreement.
Elements of a Trust
While a trust requires some of the same elements of a contract in order to be enforceable, trusts include four specific elements as well: a grantor who creates the trust; beneficiaries who receive benefits from the trust; assets or property, which is the subject of the trust; and a trustee, who is the individual in charge of administering the trust.
Revocable versus Irrevocable
An irrevocable trust is an even more specific type of trust that cannot be changed after it has been created, except with specific authorization by the grantor and the beneficiaries. Revocable trusts differ from irrevocable trusts because they can be altered without authorization of the beneficiaries.
Irrevocable trusts and contracts are both types of agreements, but it is better to think of an irrevocable trust as a very specific type of agreement that has special rules and creation criteria. Contracts are generally governed by common-law principles of contract law and the Uniform Commercial Code. Trusts, however, are governed by state uniform trust codes and the Uniform Probate Code.