What is a Revocable Living Trust and How Does it Differ from an Irrevocable Trust?

A revocable living trust is a legal document created during one's lifetime to hold ownership of assets. The person who creates the trust (known as the grantor) can change or revoke the trust at any time. This type of trust is commonly used for estate planning as it allows the grantor to maintain control over their assets while alive and provides for the distribution of those assets upon their death.

On the other hand, an irrevocable trust cannot be changed or revoked once it is created. The grantor permanently transfers ownership of assets into the trust, relinquishing control over them. Irrevocable trusts are often used for asset protection, estate tax planning, and Medicaid planning.

Differences between a Revocable Living Trust and an Irrevocable Trust

1. Control: A revocable living trust allows the grantor to control the assets held in the trust, while an irrevocable trust transfers control to the trustee.

2. Flexibility: A revocable living trust can be amended or revoked, providing flexibility, whereas an irrevocable trust is permanent and cannot be changed.

Benefits of a Revocable Living Trust

1. Probate Avoidance: Assets in a revocable living trust bypass probate, saving time and money for beneficiaries.

2. Privacy: Unlike a will, a trust is a private document and not part of public record.

Benefits of an Irrevocable Trust

1. Asset Protection: Assets in an irrevocable trust are shielded from creditors and lawsuits.

2. Estate Tax Planning: Irrevocable trusts can help reduce estate taxes and preserve wealth for future generations.