Irrevocable v. Revocable Trust

Revocable vs. Irrevocable Trusts: What's the Difference, and Which One Is Right for You?

Understanding Revocable Living Trusts and Irrevocable Trusts for Estate Planning, Asset Protection, and Medicaid Planning in Massachusetts and New Hampshire

When creating an estate plan, one of the most important decisions is choosing between a revocable living trust and an irrevocable trust. Both types of trusts can help protect your legacy, provide for your loved ones, and establish how your assets will be managed and distributed. However, they serve different purposes and offer different levels of flexibility, control, and asset protection.

At Legacy Gurus, we help individuals and families throughout Massachusetts and New Hampshire understand their estate planning options and create customized trust-based estate plans that reflect their goals, values, and long-term needs.

What Is a Revocable Living Trust?

A revocable living trust, sometimes called a living trust or revocable trust, is a flexible estate planning tool that allows you to maintain control over your assets during your lifetime while establishing a plan for incapacity and the transfer of assets after your death.

A revocable trust can help you:

Avoid probate for assets properly transferred into the trust.

Maintain control over your assets and make changes as your circumstances evolve.

Plan for incapacity by allowing a successor trustee to manage trust assets if you become unable to do so.

Protect your privacy by keeping many trust administration details outside the public probate process.

Provide for beneficiaries through customized inheritance provisions, including continuing trusts for children or other loved ones.

However, a revocable living trust generally does not protect your assets from your own creditors, Medicaid eligibility rules, or estate taxes simply because the assets are held in trust.

What Is an Irrevocable Trust?

An irrevocable trust is an estate planning tool that generally limits your ability to modify or revoke the trust after it is established. Depending on how it is structured, an irrevocable trust may offer additional benefits for assett protection, Medicaid planning, long-term care planning, and estate tax planning.

An irrevocable trust may help you:

Protect assets from certain creditors when the trust is properly designed and funded. Importantly, these types of self-settled asset protection trust usually are a significant monetary and administrative investment.

Plan for Medicaid eligibility and potentially protect a family home or other assets from certain long-term care costs, subject to applicable eligibility and look-back rules. These types of trusts are actually relatively simple to administer and keep.

Reduce estate tax exposure in certain circumstances by removing qualifying assets from your taxable estate.

Preserve family wealth through carefully structured inheritance and distribution provisions.

Avoid probate for assets properly titled in the trust.

Not all irrevocable trusts provide the same protections. The benefits depend on the trust provisions, the rights retained by the person creating the trust, the assets transferred, and applicable state and federal law.

Revocable vs. Irrevocable Trust: Which Is Better?

The right choice depends on your goals. The only way to really know which is better is to meet with an experienced attorney.

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