What is a revocable trust vs. an irrevocable trust?

When discussing trust with clients, I’m always asked, “What’s the difference between a revocable and an irrevocable trust?” It’s a distinction that can feel a bit technical, but at its core, it’s about control. While both can be used to avoid probate and maintain privacy in your estate planning, there are some key differences. Think of a revocable trust as a flexible, dynamic tool. The word “revocable” really tells you everything you need to know. As the grtor or creator of the trust, you can change it, amend it, or even dissolve it completely and terminate it at any point during your lifetime. You maintain complete control over the assets within the trust. You can add more assets, remove assets, or change the beneficiaries. It’s a great tool for managing your assets during your life and ensuring a smooth transition to your heirs. But because of this flexibility, and because you essentially maintain full control over the trust assets, such trust assets are still considered to be part of your estate for tax purposes.

As for an irrevocable trust, as the name suggests, “irrevocable” means that such a trust cannot be revoked, changed, or modified once it’s created, except under very specific and limited circumstances. When you transfer assets into an irrevocable trust, you are essentially giving up your ownership and control of those assets. The trustee of an irrevocable trust is often someone other than the grtor or creator of the trust and may even need to be a corporate trustee or other fiduciary. This is the key difference. Because you’ve given up control of the trust assets in an irrevocable trust, the assets are not considered to be part of your estate for tax purposes. An irrevocable trust may also be useful to protect assets or to reduce your taxable estate. Depending on your financial situation, an irrevocable trust could be beneficial, but would need to be weighed with the loss of control over the trust assets.

In a nutshell, a revocable trust is about flexibility and control — a great tool for managing your affairs during your lifetime and avoiding probate. An irrevocable trust is about relinquishing control for the sake of greater asset protection and potential tax benefits. The choice between the two depends entirely on your specific goals and financial situation.