The differences between revocable and irrevocable trusts

On Behalf of | May 24, 2022 | Estate Planning |

Trusts can be a valuable part of your estate plan because they enable you to pass down assets to your loved ones in an efficient manner. You can set the terms up for the distribution of the assets when you establish trusts. 

As you’re working through the process of creating the trusts, you’ll find that all trusts are classified as either revocable or irrevocable. There are some major differences between these two that you should be aware of. Understanding these may help you to make an informed decision about what type of trust you want to set up as part of your estate plan. 

Modifying the trust

One of the primary differences between revocable and irrevocable trusts is that you can modify or cancel a revocable trust, but you can’t do that with an irrevocable trust. If you want to make any changes to an irrevocable trust, you’ll typically need the permission of everyone named in the trust. 

Creditor protections

Because you can’t control an irrevocable trust, it offers some protection from creditor claims. Even if your creditors make a claim against your estate, they can’t touch the assets that are held in an irrevocable trust. A revocable trust doesn’t offer protection from creditors because you technically still have control over the assets. 

Always remember that your comprehensive estate plan will contain more than just trusts. Taking the time to ensure you have everything covered, including your end-of-life plans, can give you peace of mind and help your loved ones to reduce stress after you’re gone. These matters can get rather complex, so work with someone familiar with situations similar to yours.