What's the Difference Between a Revocable and Irrevocable Trust?

Irrevocable trusts and revocable living trusts differ in several key aspects:

Flexibility and Control

Revocable living trusts offer significantly more flexibility. The grantor can modify, amend, or even revoke the trust at any time during their lifetime. In contrast, irrevocable trusts are much more rigid. Once established, they cannot be easily changed or canceled without the beneficiaries' consent and potentially court approval.

Asset Ownership and Protection

With a revocable living trust, the grantor retains ownership and control of the assets. However, this means the assets are not protected from creditors or lawsuits. Irrevocable trusts, on the other hand, transfer ownership of the assets to the trust itself. This provides better asset protection, as creditors generally cannot reach assets held in an irrevocable trust.

Tax Implications

Revocable living trusts do not offer tax benefits, as the assets are still considered part of the grantor's estate for tax purposes. Irrevocable trusts can provide significant tax advantages. Assets transferred to an irrevocable trust are typically removed from the grantor's estate, potentially reducing estate taxes.

Estate Planning Benefits

Both types of trusts can help avoid probate, maintain privacy, and efficiently transfer assets to beneficiaries. However, irrevocable trusts offer additional benefits:

• Better protection against creditors and lawsuits

• Potential reduction in estate taxes

• Ability to preserve assets for beneficiaries with special needs or spendthrift tendencies

Duration and Permanence

Revocable living trusts last as long as the grantor desires and become irrevocable upon their death. Irrevocable trusts are permanent from the outset, lasting for the grantor's lifetime and beyond.

Contact Legacy Law Group today to discuss which type of trust is right for you. We'll hold an hour-long legacy interview during which we understand your long-term goals and priorities to determine the best estate design for you.