Revocable vs. Irrevocable Trust: What’s the Difference?

Q: What’s a revocable trust?

A revocable trust, also known as a living trust , is a fund and document that outlines what your assets are and how you’d like them handled. Revocable trusts often name the grantor as the trustee, allowing for full control of the trust and the assets within it. What makes revocable trusts so attractive is the ability to make changes to them after they’ve been created. That means you can update your named beneficiaries, how much money or which assets are included, and when the contents of your trust will be distributed, as well as the standing of the trust itself.

4 min read

Sep 19, 2023

One of the biggest differences between a revocable and irrevocable trust is your ability to make changes to the trust once it’s created. You, the grantor, can modify a revocable trust, while an irrevocable trust is not as easily changed.

Both types of trusts aim to protect and delegate your assets. They each include a grantor, or the creator of the trust, beneficiaries who will receive your assets, and a trustee, who manages your fund and distributes the assets.

Understanding the difference between a revocable trust and an irrevocable trust can help you create a better, stronger estate plan for your needs. Let’s look deeper into revocable vs. irrevocable trusts to help determine which option may be the best fit for you and your estate plan.

What’s a revocable trust?

A revocable trust, also known as a living trust, is a fund and document that outlines what your assets are and how you’d like them handled. Revocable trusts often name the grantor as the trustee, allowing for full control of the trust and the assets within it.

What makes revocable trusts so attractive is the ability to make changes to them after they’ve been created. That means you can update your named beneficiaries, how much money or which assets are included, and when the contents of your trust will be distributed, as well as the standing of the trust itself.

What’s an irrevocable trust?

An irrevocable trust, like a revocable trust, details your assets and how you’d like them to be distributed to your beneficiaries. However, unlike a revocable trust, irrevocable trusts are virtually immutable once the documents have been signed. There are some exceptions that allow for changes if all beneficiaries agree to them, but the proposed updates must go through a lengthy approval process, which can include going before a judge.

Key similarities and differences between revocable and irrevocable trusts

Understanding the difference between a revocable trust and an irrevocable trust can help you create a better, stronger estate plan for your situation. Let’s look deeper into revocable vs. irrevocable trusts to help determine which option may be the best fit for you and your estate plans.

Both types of trusts aim to protect and delegate your assets. They each include a grantor (a.k.a. the creator) of the trust, beneficiaries who will receive your assets and a trustee who manages your fund and distributes the assets.

As previously mentioned, one of the biggest differences between a revocable and irrevocable trust is your ability to make changes to it after it’s been created. You, the grantor, can modify a revocable trust, while an irrevocable trust isn’t as easily changed.

Although the largest difference between revocable and irrevocable trusts is their flexibility, there are other important distinctions between the two — such as issues of privacy, tax benefits, and probate court.

The table below outlines the main differences.

	Revocable Trust	Irrevocable Trust
Can it be easily changed once created?	Yes. Revocable trusts allow for changes to beneficiaries, trustees, what’s included, instructions for asset distribution, and the standing of the trust overall.	No. Once an irrevocable trust is created, it can’t be changed or canceled unless the beneficiaries sign off on the modifications.
Is it subject to estate taxes?	Yes. Because the trust is still under your ownership, it can be subject to estate tax.	Typically, no. By removing assets from your ownership into the trust, you may be able to help protect them from estate tax.
How long does the trust last?	Revocable trusts last as long as you want them to and can be canceled at any time. At the time of your death, a revocable trust becomes irrevocable.	Irrevocable trusts are permanent. They last for your entire lifetime and after you’ve passed.

Because both options are types of trusts, they’re typically excluded from probate court jurisdiction. This means you ultimately make the decisions regarding how your assets will be handled.

Additionally, both revocable and irrevocable trusts are kept off the public record, making it easier to keep your information (and that of your loved ones) out of the public eye.

Which is better — a revocable or irrevocable trust?

Like most estate planning tools, the type of trust you use to protect your assets depends on your specific circumstances and needs. Overall, revocable trusts tend to be more common because of the flexibility they offer. However, there are some situations that align better with an irrevocable trust.

A revocable trust may be better for you if:

You want to act as your own trustee.
You think you may want to modify your trust assets down the road.
Your estate’s value is below the federal estate tax exemption requirements^.3
You’d like to name a successor trustee who can manage the trust if you become incapacitated.⁴

An irrevocable trust may be better for you if:

You want stronger protection from creditors.⁴
You’d like to potentially qualify for Medicaid for nursing home care. (Assets held in this kind of trust are usually not counted toward eligibility.)⁴
Your estate’s value is at or above the federal tax exemption requirements.

Review your revocable trust regularly

When it comes to revocable trusts, it’s good practice to review them every three to five years so they’re current with any new assets or changes to your beneficiaries. Whether you buy a vacation home, inherit money, or invest in new companies, you now have more assets to your name. Relationships can also change, which may lead you to update your beneficiaries. For example, maybe you have children or grandchildren who you want to include in your trust.

If you’re debating between an irrevocable trust vs. a revocable trust, consider seeking the help of a certified estate planning lawyer. They’ll be able to better direct you toward the best options for you and your circumstances.

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