What is the difference between a Revocable Trust and an Irrevocable Trust?
A revocable trust can be amended, revoked or restated at any time. An irrevocable trust, on the other hand, by its terms, cannot be changed or revoked. Irrevocable trusts are frequently used to keep assets out of the grantor’s taxable estate, whereas assets in a revocable trust are includable in the estate of the grantor for estate tax purposes.
A Revocable Trust is where the Grantor can change the terms of the Trust or even revoke the Trust altogether and take back all of the assets in the Trust. An Irrevocable Trust is where the terms of the Trust cannot be changed (i.e., the beneficiary cannot be changed), and that whatever assets are placed in that Trust cannot be withdrawn by the Grantor.
If the trust instrument says that the trustmaker can revoke the trust or change the trust instrument, the trust is what we call a revocable trust. The trustmaker has complete control over a revocable trust. If the trust instrument does not allow the trustmaker to change the trust instrument or revoke the trust, we have what is called an irrevocable trust. Irrevocable trusts allow trustmakers to make gifts but keep the recipients from having complete control over the gifted assets. Trustmakers must give up control over assets that they place in irrevocable trusts.
A revocable trust is where the Grantor can change the terms of the trust or even revoke the trust altogether and take back all of the assets in the trust. An irrevocable trust is where the terms of the trust cannot be changed (i.e., the beneficiary cannot be changed), and the assets placed in that Trust cannot be withdrawn by the Grantor.
As its name implies, a revocable trust can be revoked, changed, or amended by the maker of the trust at any time. Its maker can update it as his or her desires and the needs of loved ones change. This flexibility makes a revocable living trust an ideal foundation for almost all estate plans. A revocable living trust can be designed to control all of the maker’s property, totally avoid the probate of the maker’s estate, and maximize federal estate tax savings. Irrevocable trusts, on the other hand, cannot be altered or amended without the approval of a court. Accordingly, irrevocable living trusts should be used only in certain circumstances after careful consideration and planning. Most often, irrevocable living trusts are used in conjunction with revocable living trusts to hold certain, select assets of the trust maker for the benefit of the trust maker’s loved ones. If the trust maker retains no rights in the irrevocable living trust and is not a trustee or a beneficiary of the trust
