Difference Between Revocable and Irrevocable Trust

From diff.wiki

A trust is a legal entity usually used by wealthy people to manage their assets and property. A beneficiary sets up a trust in his life to ensure proper management of his assets as expected even after his death. Trust can be categorized into two types: Revocable Trust and Irrevocable Trust. The Revocable Trust is also known as a living trust, while the Irrevocable Trust is known as a Rigid Trust.

While two types of Trust serve the same purpose, there are quite some differences between them. The differences can be seen in how a trustee, the third party in the Trust, manages the assets. Likewise, there is a difference in taxation over the grantor's death. The possibility of modifying the Trust is also a common difference between the two.

Revocable Trust

Revocable Trust is also known as a Living trust. It is a trust that allows the owner to make changes to it at any time. The changes include; removing beneficiaries, editing terms and conditions, and stipulating how the asset is managed. In a Revocable Trust, the assets are not shielded from the debtor. They are also not protected from lawsuits as such assets can be liquidated to satisfy a given judgment.

Irrevocable Trust

An Irrevocable Trust is also known as a Rigid Trust. You can't change the Trust except in certain rare circumstances. Estate assets in an Irrevocable Trust are exempted from taxes to the beneficiary's benefit. Irrevocable Trusts are shielded from creditors and lawsuits. It is a reasonable consideration for those professions with a high risk of cases.

Table of comparison

Revocable Trust Irrevocable Trust
Trust can be altered at any time. Trust cannot be altered except in rare circumstances.
The grantor can also be the trustee. The grantor cannot be the trustee.
Asset in a revocable trust is not protected from creditors. Assets in an irrevocable trust are shielded from creditors.
A court ruling can liquidate assets in a revocable trust. Assets in irrevocable trusts are protected from Court ruling and cannot be liquidated.
Easier to set up. Very difficult to set up.