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Revocable vs. Irrevocable Trusts: How to Choose What’s Right for You

Individuals and families planning their estates have many vehicles from which to choose. Most people will choose to create some type of trust as part of an overall estate plan, but not all trusts are created equal and not all trusts have the same benefits. 

What is a Trust?

Different investment vehicles serve different purposes. Tax-deferred retirement plans serve one purpose, while annuities, for example, serve another. So, too, with trusts. The purpose of this article is to explain some of the differences between revocable and irrevocable trusts and to provide some guidance regarding which might be right for you in certain circumstances. But first, let’s start with some terms. 

A trust is an agreement or arrangement between certain parties, allowing one party to manage assets for the benefit of another. In many cases, those roles are occupied by the same party. In the simplest of examples — where the trust is created by one person, for one person, and to be managed by one person), the creator of the trust (known as the “settlor,” “trustor,” or “grantor”), establishes it for the benefit of a “beneficiary” and also manages that property as “trustee.”   

These roles can also be occupied by others. That same grantor can nominate someone else to be a trustee and name someone else as a beneficiary, but more on that later.


Defining the Differences: Revocable Vs. Irrevocable Trusts

There are some very significant differences between revocable trusts and irrevocable trusts.  One main difference, of course, is evident from their names:

  • A revocable trust can be revoked or amended by the grantor during her lifetime.
  • An irrevocable trust cannot be revoked or amended without a court order. 

One way to tell if a trust is revocable or irrevocable is to look at the title. Many revocable trusts will have the word “revocable” or “living trust” in the title, but this is not required. The best way to determine if you are looking at a revocable or irrevocable trust is to read the trust document.  

A revocable trust will include language stating that the trust is revocable and will prescribe how the trust is to be revoked or amended. This is because a trust can be revoked or amended only pursuant to its terms.

An irrevocable trust will state in the body of the document that it is not revocable. But as in most legal issues, there are exceptions. 


Sometimes, a revocable trust becomes irrevocable upon a certain condition. The best example of this would be upon the death of a sole grantor of a revocable trust.

For example, as part of her overall estate plan, Gabby Grantor creates her trust during her life as grantor, beneficiary, and trustee. She manages her trust as trustee for many years. Her trust will state that upon her death, the trust becomes irrevocable because it acts as a will substitute to provide for her heirs and beneficiaries. It also serves to help Gabby avoid probate.

When she dies, her successor trustee (nominated in the document) must send a notice to all of the beneficiaries of the trust and her heirs at law as required by California Probate Code 16061.7. That notice advises those recipients (among other things) that the trust has become irrevocable and that each of the beneficiaries is entitled to request a copy of the trust.  

But why create a revocable trust if you can just create a will or die without one?

A trust offers the benefit of preventing an estate from going into probate. A probate is a court-supervised process whereby someone is appointed to marshal the assets of a deceased person, pay her debts, and then distribute what remains to her heirs at law and/or to those she wishes to receive her property.

Probates are court proceedings and are a matter of public record. They also take a long time to complete, and can be expensive in that the attorney’s fee in a probate is set by statute as a percentage of the estate’s assets. By contrast, a trust administration on death is private, less expensive, and faster.  

Also, if you are incapacitated during life or simply wish to turn management of your assets over to someone else, your revocable trust provides for a “successor trustee” who can take over for you. This is not possible without a trust.

For these reasons and many others, most people planning their estates will choose to create a living trust.


Why Estate Planning Matters

When considering revocable vs. irrevocable trusts, some clients will ask their counsel, “which trust is better?”

This question is a lot like asking, “Which tool is better: a hammer or a screwdriver?” Each is a tool designed to perform a different function.

A revocable trust operates more as a will substitute and provides the grantor with great flexibility. However, the assets in a revocable trust remain owned by the grantor and are includible in her estate on her death. A revocable trust is not a separate tax-paying entity and any capital gains or income generated by assets held in that trust are taxable to the grantor.

Also, assets in a revocable trust are available to the creditors of the grantor. For example, if the grantor is sued for negligence as a result of an auto accident, assets in her revocable trust are available to that creditor. 

Contrast that with an irrevocable trust, which is a separate tax-paying entity. The irrevocable trust must file an income tax return. The settlor who creates the trust does not own the assets in the trust, although she may (as “trustee”) continue to manage those assets.

The benefit here is that assets transferred to an irrevocable trust are not included in the estate of the settlor and are not owned by that grantor or available to her creditors.

a lawyer signing an official document

Let’s look at Gabby Grantor again. 

Gabby Grantor creates an irrevocable trust for the benefit of her son, Timmy. To that trust, Gabby transfers $1,000,000 worth of publicly traded stock.

If that stock grows in value to $5,000,000 and then Gabby dies, the $5,000,000 of value is not included in her estate because the trust owns those shares – not Gabby.

This is one reason many wealthy people create irrevocable trusts for the benefit of their children and grandchildren as a means to remove assets from their estate and provide for their descendants. Those assets are also not included in Gabby’s estate if she is sued. 

Let the Estate Planning Experts Help You Protect Your Legacy

In conclusion, a revocable living trust can help you avoid probate, manage assets during life (and on incapacity), and provide peace of mind and privacy. An irrevocable trust can provide a means to minimize or eliminate estate taxes and also shelter property from creditors. Before making any choices in this regard you should consult with the experienced counsel at Cage & Miles.

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