Irrevocable Trust | Revocable Trust |
No amendments, modifications or revocations | Can be modified, liquidated and revoked while Trustor is mentally competent |
Avoids probate | Avoids probate* (may require creation of a pour-over will for assets not placed in revocable trust-may still go to probate) |
Remains out of public record* | Remains out of public record |
Trustor decides when beneficiary receives | Counts as current income |
Tax protections | No estate tax protection |
Lawsuit protection | No lawsuit protection |
*some exceptions
Irrevocable Trust
a) An irrevocable trust is intended to be permanent once it is created.
b) It is intended to endure, with changes only made with court approval or consent from all beneficiaries. The beneficiaries may make changes to an irrevocable trust in certain situations.
c) However, a court has the power to determine that an irrevocable trust was created to keep funds away from creditors if the trustor is in litigation or foresees litigation and created the irrevocable trust in contemplation of a lawsuit or other event that may involve the trust’s assets.
d) This type of trust can provide asset protection from creditors and lawsuits.
e) When creating an irrevocable trust, the trustor is able to specify after death distributions
f) An irrevocable trust is not subject to probate and is not a matter of public record, unlike a will which goes through the probate process.
g) Property that is placed into an irrevocable living trust does not contribute to the value of your estate for estate tax purposes.
h) Assets in an irrevocable trust may not be counted by Medicaid if placed into the trust prior to the “look-back” period.
i) This type of trust may provide protection for special needs beneficiaries in qualifying for government benefits as opposed to if the beneficiaries inherited the assets.
j) Currently and through 2025, estates are subject to a federal estate tax on the balance over the valued threshold below:
2024 | $13,610,000 |
2025 | $13,990,000 |
Type of irrevocable trusts include: living trusts, testamentary trusts, irrevocable life insurance trusts and charitable trusts.
Revocable Trust
a) This type of trust remains in the possession and control of the trustor and can be modified and liquidated at any time as long as the trustor is mentally competent.
b) The trustor is considered the owner of property placed into the revocable trust.
c) A revocable trust does not offer current asset protection for the person who creates the trust. As the grantor, you retain full control over the trust’s assets—you can amend, revoke, or withdraw from the trust at any time. Since you are considered the legal owner of the assets, creditors can still reach them.
d) No protection against estate taxes or lawsuits.
e) The trustor has full access to the trust funds until death. The trust becomes irrevocable upon death because the trustor no longer has control or power to change the trust. At this stage, the trust assets are no longer considered part of the deceased’s estate and are protected from the beneficiaries’ creditors.
f) A revocable trust can provide significant protection for future heirs and beneficiaries. For example:
Special Needs Beneficiaries: Assets can remain in the trust and be used for the care of a beneficiary with disabilities without affecting eligibility for government assistance programs.
Minor Children or Spendthrift Heirs: The trust can manage and distribute funds responsibly instead of providing a lump sum that may be mishandled.
What type of trust best meets your needs? If you would like to discuss your trust, make an appointment now with Kamenetsky Law.
Disclaimer — This content is for general information only. The information contained herein is not legal advice for any specific matter, nor does it create an attorney-client relationship. Laws vary from one state to another. For legal advice, consult an attorney.
Comments