Revocable vs. Irrevocable Trusts: Differences and How to Choose
Learning the differences between revocable and irrevocable trusts can help you strengthen your estate plans.
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Head of Content, New Verticals 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 .
Revocable trust pros and cons
Pros
Maintain control of assets while alive.
Protection in case of incapacity.
Avoids probate.
Preserves privacy.
Cons
No estate tax benefits.
No protection from creditors.
Complex legal instrument that can be difficult to administer.
Irrevocable trusts pros and cons
Pros
Potential estate tax reduction.
Protection from creditors.
Protection in case of incapacity.
Avoids probate.
Preserves privacy.
Cons
Relinquish control of assets while alive.
Limited flexibility.
Complex legal instrument that can be difficult to administer.
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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 .
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 .
» MORE: How to find a financial advisor
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 . For this reason, people often use irrevocable trusts for advanced tax planning and gifting.
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.
Other types of trusts
There are many different kinds of trusts, and they each can help meet certain goals. Here are some commonly used trusts for estate planning:
- Bypass trust (also called a credit shelter trust or AB trust): An irrevocable trust often used by married couples to reduce estate taxes on certain assets. When the first spouse dies, assets move into trusts for the second spouse to use, but not own. When the surviving spouse dies, any assets that remain can bypass the second spouse’s estate and transfer tax-free to heirs.
- Qualified terminable interest property trust, or QTIP: Upon the first spouse’s death, the trust provides an income stream and use of property to the surviving spouse. When the surviving spouse dies, assets transfer to the final beneficiary. This is a common tool used in second marriages — to support a current spouse and children from a prior marriage.
- Qualified domestic trust, or QDOT: Similar to the QTIP, but with a surviving spouse who is a noncitizen.
- Grantor-retained annuity trust, or GRAT: The grantor transfers assets into the trust and specifies their beneficiaries, but earns income for a period of time before the asset is gifted.
- Qualified personal residence trust, or QPRT: Similar to the GRAT, but the trust asset is real estate. The grantor can live in the property rent-free for a period of time before it’s gifted to heirs.
- Spousal lifetime access trust, or SLAT: The grantor creates a trust for the benefit of the beneficiary, usually a spouse or children. This moves assets out of a taxable estate during the grantor’s lifetime but the spouse or children can receive distributions to help support the grantor.
- Generation-skipping trust: The grantor gives assets directly to grandchildren. This way, children can become income beneficiaries but skip or bypass estate tax, since they never own the assets themselves. Note that these trusts may be subject to a generation-skipping tax.
- Dynasty trust: This trust passes assets from generation to generation but can mitigate the impact of taxes (estate, gift or generation-skipping tax) as long as there are assets remaining in the trust.
- Spendthrift trust: This trust is set up for a beneficiary who may not be capable of managing the assets on their own.
- Special needs trust: For parents of children with functional needs, a special needs trust provides financial support while maintaining the child’s eligibility for governmental assistance.
- Intentionally defective grantor trust, IDGT or grantor trust: A strategy that allows the grantor to transfer assets into the trust and still pay any income taxes on income from those assets. However, the grantor is not considered the owner of the assets when it comes to estate taxes. By paying the trust’s taxes, the grantor helps the trust’s value grow faster.
- Irrevocable life insurance trust, or ILIT: The trust owns a life insurance policy and receives the death benefit proceeds of the policy when the grantor dies. The trust beneficiaries receive the policy proceeds as a way to cover any outstanding estate taxes.
- Charitable trust: Trusts set up to benefit charity and gain favorable tax treatment for the grantor. Frequently used charitable trusts include charitable remainder trusts, charitable lead trusts and pooled income trusts.
- Asset protection trust: A trust set up to protect assets from creditors.
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- 1. The American College of Trust and Estate Counsel. Can I Change My Irrevocable Trust?. Accessed Sep 20, 2025.
- 2. Cornell University Legal Information Institute. revocable trust. Accessed Sep 20, 2025.
- 3. IRS.gov. Abusive trust tax evasion schemes - Questions and answers. Accessed Sep 20, 2025.
- 4. IRS.gov. Basic trust law. Accessed Sep 20, 2025.
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