If you’re considering a trust as part of your estate planning, one of the first decisions you have to make is if you want to use a revocable trust – often called a living trust – or if you’d like to use an irrevocable trust.
They’re similar in some ways, in that you’re putting assets into the trust and then it controls how they are being distributed, but there are some significant differences. It’s important to know how they vary so that you can decide what will be best for your estate plan.
The revocable trust can be changed
If you create a revocable trust, you always have the option to change the terms of that trust. You are the owner of the trust, and these modifications are up to you. Perhaps you want to add a new beneficiary in so that they will receive some of the assets, or maybe you want to remove a beneficiary. You can do as you please.
The irrevocable trust cannot be changed without consent
There are some situations in which an irrevocable trust can also be modified, but the key is that the beneficiaries have to consent to the change. This means that the trust generally cannot be altered, even by the person who created it. Once you set it up and name the beneficiary, they are going to remain in that position, even if you change your mind. They would have to agree to an alteration to take them out or to add someone else in.
The benefit is that an irrevocable trust can often be used to keep the assets from creditors by fully removing those assets from your estate, whereas a revocable trust may still need to be liquidated. Your ability to alter it means that you essentially still have control over those assets.
When deciding which you need, it may help to work with an experienced team. You need to look at all of your options and consider what will truly be best for your family.