What’s the Difference Between a Revocable vs. Irrevocable Trust?

December 10th, 2024
Posted By
Sarah M. Litowich
IRREVOCABLE TRUST - words on wooden blocks on a white background with a judge's gavel.
A common estate planning tool that is used to pass assets is a trust. These instruments allow a third party to hold assets on behalf of a beneficiary and distribute them in accordance with the instructions provided by the creator. While there are many different types of trusts that can be used based on your objectives, they fall into one of two categories — they can either be revocable or irrevocable. It’s important to understand the differences to determine whether a revocable vs. irrevocable trust best fits your needs.

What is a Revocable Trust?

A revocable trust — also referred to as a living trust — describes a trust that can be changed at any time during the creator’s lifetime. The creator, also called a grantor, of a revocable trust can remove beneficiaries, add new ones, and modify the terms of how the assets are managed or distributed. These trusts offer a considerable amount of flexibility since they allow the grantor to draft the trust and also manage the assets in it. They become irrevocable once the grantor passes away. There are several crucial benefits to note when it comes to revocable trusts. Significantly, revocable trusts avoid the lengthy and public probate process that a last will and testament must go through and allow beneficiaries to access their inheritances more quickly. They also allow a grantor to make changes to the trust in the event they acquire additional assets, or a major life event occurs — such as the birth or adoption of a new child. In addition to determining how assets will be distributed upon death, a revocable trust can also be used for incapacity planning.

What is an Irrevocable Trust?

An irrevocable trust is a legal arrangement that the grantor cannot easily change, amend, modify, or terminate after it has been established. Critically, the only way an irrevocable trust can be modified is by consent of the grantor and all beneficiaries or court order. Once an irrevocable trust has been set up, the grantor gives up control of the assets that were placed in it and they are managed by a trustee. The trustee is responsible for managing the trust according to the terms outlined by the grantor in the trust instrument. Irrevocable trusts can strategically be used for a number of purposes in estate planning, based on the grantor’s goals. Not only can they distribute assets to loved ones, but they can also do the following:
  • Reduce estate taxes
  • Safeguard assets from creditors
  • Protect assets from legal judgments
  • Help plan for Medicaid qualification
  • Provide for a loved one with special needs
  • Bequeath assets to a charity
A testamentary trust is a common type of irrevocable trust that is created as part of a last will and testament and takes effect after the grantor’s death. However, it is important to be aware that unlike other types of irrevocable trusts, a testamentary trust does not avoid probate since it is dependent upon the terms of the will.

Is a Revocable vs. Irrevocable Trust Better?

While one tool is not necessarily better than the other, there are many differences that should be noted when it comes to a revocable vs. irrevocable trust. The biggest distinction is that revocable trusts can be modified while irrevocable trusts cannot usually be changed once they are created. If you wish to have the flexibility of updating your trust if your financial or family situation changes, creating a revocable trust might be better for you. Another factor to consider when deciding whether a revocable vs. irrevocable trust is more beneficial for you concerns your asset protection goals. Typically, the assets in a revocable trust are not protected from creditor claims or legal judgments. This can make an irrevocable trust a more advantageous option for those who are concerned about safeguarding their assets — as well as those in high-risk professions who are vulnerable to lawsuits. Additionally, a revocable trust cannot avoid estate tax obligations, while an irrevocable trust can strategically be used to minimize the estate tax burden that may be incurred by the beneficiaries.

Contact an Experienced Oregon Estate Planning Attorney

It's best to discuss your specific objectives with a knowledgeable estate planning attorney who can advise you regarding the pros and cons of using a revocable vs. irrevocable trust. Based in Salem, Litowich Law provides clients in Oregon with capable counsel and reliable representation for a wide range of estate planning matters, including creating trusts. We welcome you to contact us to schedule a consultation to learn how we can help.
Categories: Estate Planning