Differences between Revocable and Irrevocable Trusts

Differences between Revocable and Irrevocable Trusts. It is not simply that one can be revoked, amended and not the other. It is purpose:

Mostly traditional trusts are revocable, and irrevocable trusts are for special purposes.

There are lots of exceptions to this general introduction, but I’ll highlight main points.

Revocable Trust

  • You can revoke or amend it.
  • Usually a primary purpose is to pass assets;
    1. Without probate; And
    2. potentially under conditions for distribution, for example
      • To my children, but only after they reach age 25; or
      • To my nephew for need-based support for his post-secondary education;
  • Assets remain in control of grantors (those who started the trust);
  • These become irrevocable at death of one or more grantors (trust still operates but mostly cannot be revoked or changed).

Irrevocable Trust

  • You cannot (mostly) revoke or amend it.
  • Primary purpose may be to remove assets
    1. from one’s taxable estate (if they believe they will die with more than 11 ½ million in assets; or
    2. authorities might not count these assets if grantor needs to go into nursing care (there are very particular rules federally and by state for this); or
    3. in hopes that assets are beyond reach of creditors, since no longer under control of grantor(s);(again, one would need to employ particular language for a good result)

So again, it is about purpose. Mostly traditional trusts are revocable and irrevocable trusts are for special purposes. So ask me, “which do I need?” And the answer depends upon the primary aim of your trust.

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