Revocable vs. irrevocable trusts: What’s the difference?

Which kind of trust you should open depends on the goal of your estate plan

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Elissa SuhSenior Editor & Disability Insurance ExpertElissa Suh is a disability insurance expert and a former senior editor at Policygenius, where she also covered wills, trusts, and advance planning. Her work has appeared in MarketWatch, CNBC, PBS, Inverse, The Philadelphia Inquirer, and more.

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The main difference between a revocable and irrevocable trust is whether or not a grantor (trustor or trust creator) can amend the trust: A grantor can amend a revocable trust at their discretion but can only amend an irrevocable trust in certain situations. Both types of trusts are legal entities that hold assets on behalf of the grantor and can help avoid probate, which makes them integral estate planning tools for leaving an inheritance. By comparison, using a last will and testament offers less control, since it can be challenged in court.

Key takeaways

  • A revocable trust can easily be modified

  • An irrevocable trust can only be amended under narrow circumstances and requires an attorney to set up

  • Revocable trusts and irrevocable trusts have different advantages, based on who owns the trust property

There are a few marked differences between a revocable and irrevocable trust, including how much the trust costs and who owns the trust property, a key factor that dictates the benefits and disadvantages of either type of trust. A revocable trust is suitable for most people, while people with very large estates or who need their estate plan to do something extra, like minimize taxes, provide for a special beneficiary, or help someone qualify for benefits, may need to open an irrevocable trust.  

Why would you want a revocable trust?

A revocable trust can be amended or dissolved at the grantor's discretion. The grantor generally serves as the trustee of their revocable living trust (which is also known as a grantor trust), allowing them the flexibility to add assets or amend the terms up until they die. Upon the grantor's death, a successor trustee steps in to manage property according to the trust document.

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The benefits of a revocable trust include:

  • Probate avoidance for trust assets

  • Flexibility to remove and retitle trust assets

  • The option to amend the trust agreement or dissolve the trust

  • Greater planning for incapacity versus just a will

  • Easy and cost-effective to use 

Why would you want an irrevocable trust?

The irrevocable trust continues to exist until it fulfills its purpose set out by the grantor in the trust agreement. The grantor generally can’t be the trustee, nor can the trust be modified except under narrow circumstances. What the grantor lacks in authority over the trust once it’s been created, they gain in other benefits that aren’t available with a revocable trust. 

The benefits of an irrevocable trust include:

  • Asset protection: irrevocable trust property is shielded from creditors

  • Tax advantages: reduced capital gains tax, estate tax, and income tax for the grantor

  • Qualifying for benefits: grantors do not have to claim or list irrevocable trust assets as their own, since assets are owned by the trust

  • Probate avoidance (also available with revocable trust assets)

Read the full breakdown on how an irrevocable trust works.

Should I choose a revocable or irrevocable trust?

Whether or not you need a revocable or irrevocable trust depends on your estate planning goals. If you just want a way to pass on assets to your beneficiaries outside of using a will (which must undergo the probate process), then a revocable living trust might be right for you.

If you have greater concerns — like shielding your assets from creditors or minimizing estate tax —  you’re more likely to benefit from an irrevocable trust. In 2023, federal estate tax is only levied on estates worth at least $12.92 million so irrevocable trusts are a useful planning choice for primarily wealthy individuals. 

But even if you are not extremely wealthy, an irrevocable trust may be worthwhile for other purposes, like providing for a spendthrift beneficiary or a child with special needs. Unlike a revocable trust, an irrevocable trust can also help you qualify for Medicaid, which can pay for a nursing home. (Proper Medicaid planning with an irrevocable trust can help moderate-income individuals meet the program’s eligibility requirements.) Specialty trusts like a Medicaid trust and special needs trust fall under the irrevocable category. 

Learn how to set up a trust in six steps.

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