What’s the Difference Between a Revocable Trust and an Irrevocable Trust?

When it comes to estate planning, trusts are a powerful tool that can provide many benefits for senior citizens. However, not all trusts are created equal, and it is important to understand the difference between a revocable trust and an irrevocable trust.

A revocable trust, also known as a living trust, is a type of trust that can be amended or revoked by the grantor (the person who creates the trust) at any time. This means that the grantor has complete control over the assets in the trust and can make changes as needed.

One of the main advantages of a revocable trust is that it allows the grantor to avoid probate, which can be a time-consuming and expensive process. Additionally, a revocable trust can be used to plan for incapacity, allowing a designated trustee to manage the trust assets if the grantor becomes unable to do so.

On the other hand, an irrevocable trust is a type of trust that cannot be amended or revoked by the grantor once it is created. This means that the grantor gives up control over the assets in the trust and they become the property of the trust itself.

One of the main advantages of an irrevocable trust is that it can provide significant tax savings. For example, if the grantor creates an irrevocable trust for their children or grandchildren and funds it with assets that have appreciated in value, those assets can grow tax-free. Additionally, an irrevocable trust can be used to protect assets from creditors, which can be particularly beneficial for senior citizens on a fixed income.

As an elder law practice, we recommend a trust to a client who is a senior citizen for several reasons. First and foremost, a trust can be a valuable tool for estate planning and asset protection. A trust can be used to avoid probate, plan for incapacity, and protect assets from creditors, all of which are important considerations for senior citizens. Additionally, a trust can be used to provide for a senior citizen’s loved ones, whether it be through a revocable trust that allows the grantor to maintain control over the assets or an irrevocable trust that provides tax savings and asset protection.

An elder law attorney can help navigate the different types of trusts and recommend the best one for a client’s individual needs. It’s important for senior citizens to understand the difference between a revocable trust and an irrevocable trust and to consider the advantages of each type of trust before making a decision. A trust can provide significant benefits for estate planning and asset protection, and an elder law attorney can help ensure that a trust is set up in the most effective way possible for a senior citizen client.