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Legacy Planning: Revocable Trust vs. Irrevocable Trust

Loren Merkle, CFP®, RICP®, Certified Financial Fiduciary

Many people believe that a trust is only for the wealthy. In reality, many families and individuals could benefit from some type of trust. The key is identifying which type of trust (if any) is right for you. Here is a look at two common types of trusts, revocable and irrevocable.

Revocable Trust
A revocable trust, sometimes referred to as a living trust, is a trust that can be changed at any time by the person who creates the trust. They can remove beneficiaries, designate new ones, and modify instructions on how the assets within the trust are managed. The trust creator can even terminate the trust. The revocable trust offers a lot of flexibility. It is often the best way to pass on assets to beneficiaries. Many times this includes their children. The trust allows the creator to set aside specific amounts of money to be distributed at recurring intervals. Many people like exercising this type of control while their children are minors.

One disadvantage of the revocable trust is that the assets are not shielded from creditors or lawsuits.

Irrevocable Trust
An irrevocable trust is difficult to change. Trust laws vary by state, but generally, once the agreement is made, it can only be amended under rare circumstances.

Irrevocable trusts are typically set up to minimize estate taxes, access government benefits, or protect assets. This process requires the creator to essentially give up any legal right to the assets in the trust by giving the assets to the trust. A trustee would control the assets.

Assets titled in the name of an irrevocable trust, in many instances, are protected from the reach of creditors. This aspect of an irrevocable trust can benefit those in professions at risk of lawsuits (such as surgeons, architects, attorneys, or real estate developers).

Irrevocable trusts are generally more complicated to set up than revocable trusts. They usually require more of an attorney’s time and therefore are more costly to set up.

Many people wonder if they should place their home in an irrevocable trust. This would keep it away from creditors and estate taxes. However, it might not be worth the cost and effort. In 2022, federal estate taxes only apply to estates larger than $12.06 million for one person and $24.12 million for a couple.

Several states do have an estate tax. Oregon and Massachusetts have a threshold of just $1 million. Iowa is one of 38 states that do not have an estate tax.

One advantage of setting up a trust, revocable or irrevocable, is that it allows your estate to pass to your beneficiaries without going through probate. Probate is the legal procedure your estate goes through when you pass away. Avoiding probate means avoiding a sometimes lengthy and expensive court process. Avoiding probate also allows you to keep your estate matters private. Probate includes collecting and taking inventory of all real estate, personal, and household items to assess their value. This information is public record and accessible to anyone.

Sources:,, and

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