What Is the Difference Between Revocable and Irrevocable Trusts?

 Posted on November 27,2024 in Estate Planning and Probate

A trust is a valuable and essential tool in estate planning and carries many advantages. A grantor who places his or her assets in a trust can have more control over how they are distributed, and beneficiaries of a trust can bypass the harrowing probate court process that oversees the execution of a will. A trust works by assuming ownership of any asset that is transferred, which avoids certain legal procedures and requirements. While there are many types of trusts for various purposes, they fall into two main categories: revocable trusts and irrevocable trusts. There are significant pros and cons to each, so consult with a Texas estate planning attorney about which trust would be right for you.

What Is a Revocable Trust?

A revocable trust, also referred to as a living trust, can be changed, terminated, or revoked by the grantor at any point during his or her lifetime as long as he or she has the mental capacity to do so. Advantages of a revocable trust include:

• Flexibility: As the grantor, you can add or remove beneficiaries and assets, change the terms of the trust, or revoke it altogether. 

• Probate avoidance: By putting the assets in a trust, you can avoid probate, which is when a court oversees the execution of a will after a person dies. The probate process is usually lengthy and involves complex legal procedures, unwanted publicity, and heavy paperwork. Beneficiaries may only get a fraction of the assets after creditors take their share during probate. 

• Incapacitation planning: A revocable trust can seamlessly continue to be managed even if you become incapacitated. The person who you named to manage the trust — called the trustee — can continue to oversee the trust without disruption.

However, a revocable trust also comes with certain disadvantages:

• Taxes: Assets in a revocable trust are still considered part of your estate and are therefore subject to taxes.

• Lack of asset protection: Assets that you place in a revocable trust are still exposed to creditors and lawsuits.

What Is an Irrevocable Trust?

Unlike a revocable trust, an irrevocable trust cannot be modified or revoked because its assets are no longer part of the grantor’s estate. Since the irrevocable trust wholly owns the assets, it offers certain benefits:

• Tax reduction: Property in an irrevocable trust may enjoy estate tax reductions since it is no longer part of your estate.

• Asset protection: Since you do not own or control the assets in an irrevocable trust, they usually are protected from creditors and legal threats.

The main disadvantage of an irrevocable trust is that it has little flexibility. A grantor can sometimes modify or revoke an irrevocable trust, but it usually requires court approval.

Contact a Wilson County, TX Estate Planning Attorney

There are pros and cons to revocable and irrevocable trusts, so consult a San Antonio, TX estate planning lawyer about which type of trust would be the best fit for you. Geoff Mayfield, Attorney at Law provides first-class legal services in estate planning and can draft the right trust for your needs. Call 210-535-0870 now for a free consultation today.