Revocable vs. Irrevocable Trusts: Differences and How to Choose

In estate planning, it's common to have your will work in conjunction with a trust to transfer assets to heirs. But in order to decide whether a trust might fit with your future goals, you’ll need to understand the two main types of trusts: revocable and irrevocable.

Revocable vs. irrevocable trusts: Key differences

The main difference between revocable trusts and irrevocable trusts is that a revocable trust can be modified at any time while you're alive, whereas an irrevocable trust almost never can be changed^[0]

Revocable trust pros and cons

Irrevocable trusts pros and cons

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What is a revocable trust?

A revocable trust is a legal document that creates a separate legal entity into which the creator (the grantor) places their assets. The grantor names a trustee to manage those assets on behalf of the grantor and their named beneficiaries^[0]

A revocable trust is also known as a living trust, revocable living trust or inter vivos trust.

Benefits of using a revocable trust

There are several reasons a revocable trust can be an effective estate planning tool.

• For many, the draw of a revocable trust is that the grantor can change the terms of the trust or dissolve the trust whenever they want.

• A revocable trust becomes effective as soon as the legal document is signed and assets are titled in the name of the trust.

• Unlike a will, which becomes active only when you die, the trust is able to help handle your affairs even if you become incapacitated.

• Many people use revocable trusts to help their heirs and estates bypass the probate process, which can be time-consuming and costly in some states. Bypassing probate also allows the details of the trusts to remain private instead of becoming public record.

Downsides of revocable trusts

You can change a revocable trust any time, so in the eyes of the IRS, the assets in the trust are still yours. As such, setting up a revocable trust doesn’t reduce or avoid estate taxes. Additionally, creditors are still able to make claims against the assets in a revocable trust to recover debts you may owe^[0]

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What is an irrevocable trust?

An irrevocable trust is a trust that usually can’t be changed or revoked once it’s in place. Under limited circumstances there are exceptions to this, but they typically require a court order and/or all beneficiaries to agree to the changes.

When you transfer assets into an irrevocable trust, you give up ownership of the assets. In the eyes of the IRS, this means they are no longer part of your estate and thus aren’t subject to estate taxes^[0]

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Benefits of irrevocable trusts

• Like revocable trusts, irrevocable trusts avoid probate and preserve privacy.

• Irrevocable trusts can also shelter assets from creditors and reduce estate taxes because the grantor gives up ownership of the assets placed inside the trust. Because of this creditor protection, irrevocable trusts can be especially beneficial for people in professions that frequently face lawsuits, such as real estate developers, doctors and lawyers.

• For those with large estates, estate tax can be a concern. The federal estate tax ranges from 18% to 40% and generally only applies to assets over $13.99 million in 2025 or $15 million in 2026. Additionally, each state also levies its own estate taxes.

• An irrevocable trust can shift assets away from the individual so they can still qualify for certain government programs, such as disability benefits, Supplemental Security Income or long-term care coverage from Medicaid.

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Limitations of irrevocable trusts

A big limit of an irrevocable trust is that the grantor must give up control and ownership of their assets. Grantors need to balance the amount of assets they remove from their estate with the potential that they might need to use those assets down the road.

Another drawback is that many irrevocable trusts involve complicated strategies that can be difficult to set up and administer. Irrevocable trusts require their own separate tax identification numbers and tax returns. Hiring a financial advisor or an estate attorney is often a good idea.

On the tax front, even though irrevocable trusts help reduce or eliminate estate tax, trusts can be subject to higher income tax rates.