Revocable versus Irrevocable Living Trusts: Which One is Right for You?

When planning your estate, one of the most important decisions you could face is whether to create a revocable trust or an irrevocable trust. Both tools can help you control how your assets are managed and distributed, but they function very differently. Understanding the pros and cons of each will help you choose the option that best fits your goals, your family’s needs, and your financial situation.

What is a revocable trust?

A revocable trust, also called a “living trust,” is a trust that allows you to change or revoke it at any time while you’re alive. You remain in control of any assets placed in the trust, and you can amend the terms, add or remove property, or even dissolve the trust altogether.

What are the advantages?

• Flexibility – You maintain complete control of the trust and can update it at any time if your circumstances change.
• Avoids probate – Assets in a revocable trust typically bypass the probate process. This saves time, expense, and manages privacy concerns.
• Continuity of management – If you become incapacitated, your successor trust can step in and manage the trust without court intervention.

What are the limitations of a revocable trust?

• No asset protection – Since you retain control, the assets are still considered a part of your estate. Creditors can reach them, and they count toward estate taxes.
• Limited tax benefits – Revocable trusts do not reduce income or estate tax liability.

Revocable trusts are often best for those who value control and want to simplify the transfer of assets to their heirs without going through probate.

What is an irrevocable trust? 

An irrevocable trust cannot be altered or revoked once it is created (except in very limited situations, and usually with court approval). When you transfer assets into an irrevocable trust, you give up ownership of those assets. The trustee (not you) has legal control over them.

Advantages of irrevocable trusts:

• Asset protection – Since the assets are no longer legally yours, they are generally protected from creditors and lawsuits.
• Tax benefits – Assets in an irrevocable trust can be excluded from your taxable estate. This reduces your potential estate tax liability. Some irrevocable trusts also provide income tax advantages.
• Eligibility for benefits – Certain types of irrevocable trusts can help preserve your eligibility for government programs like Medicaid.

Limitations of an irrevocable trust:

• Loss of control – Once your assets are placed inside the trust, they can no longer be accessed.
• Complexity – Irrevocable trusts require careful drafting and ongoing administration to meet legal and tax requirements.

Irrevocable trusts are often best suited for high-net-worth individuals seeking asset protection. Families with long-term care concerns can also benefit from them.

Talk to a Virginia Beach, VA, Wills and Trusts Lawyer Today

The Law Office of Angela N. Manz represents the interests of those seeking to establish a will or a trust. Call our Virginia Beach estate planning lawyers today to schedule an appointment, and we can begin discussing your next steps right away.