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Revocable Trust vs. Irrevocable Trust

Contrary to what many believe, a revocable trust or an irrevocable trust is not one particular kind of trust.  "revocable" just means you can amend or revoke the trust during your lifetime, while "irrevocable" trusts cannot be revoked, and may only be amended in limited circumstances.

Inside the categories of revocable and irrevocable trusts are many different specific kinds of trust, each designed to accomplish different goals.  An irrevocable trust is generally used to protect assets and/or allow for the support of a special needs child or adult without causing them to lose means-tested benefits.

Revocable trusts are generally used to avoid probate, to provide for management of a minor's inheritance, to hold real property, or to provide guidance on the disposition and/or management of assets or properties.

Irrevocable Trusts: What You Need to Know

The main consideration is fairly obvious: once you place assets into an irrevocable trust, you no longer have them.  In many trusts you can still enjoy income from the assets, but the assets themselves are beyond your reach.

This means a good estate plan for you needs to strike a balance between what you might need to support your lifestyle and the assets you want to protect.  Many people who use an irrevocable trust for Medicaid planning, for example, will place real property into the trust and keep their investment accounts or other liquid assets out.  This means you may end up paying for some of your long term care out of your legacy, but you will have still protected a substantial asset without impoverishing yourself.

Revocable Trusts: What You Need to Know

The most important thing you need to know about a revocable trust is that it will not provide asset protection from creditors, long term care or taxes (with the limited exception of a family trust for married couples).  If your goal with a trust is anything but asset protection, a revocable trust is a very flexible instrument, and you reserve the right to change your mind if your life circumstances or wishes change.

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Trust Terminology

You may have read or heard of different kinds of trusts, but be unsure what they do and whether they are revocable or irrevocable.  Below is a list of some common trust types and what they are:

Living Trust (also called in inter vivos trust): this means any trust you create during your lifetime, as opposed to a trust created in your will.  These can be revocable or irrevocable.

Family Trust: this generally refers to the trusts created for married couples to pool their estate tax exemptions.  These can be revocable or irrevocable, but generally people do this as a revocable trust.

Spendthrift trust:  this is a trust that is designed to protect a beneficiary's assets from creditors and/or a beneficiary's lack of capacity or poor financial decisions.  Any kind of trust can contain a "spendthrift" provision giving the trustee broad authority over what funds to authorize, but a trust that is designed to protect from creditors should be irrevocable.

Crummey Trusts: these are trusts that allow you to give away assets to a trust instead of an individual beneficiary to reduce your taxable estate and avoid gift taxes.  In order to qualify, the beneficiary must be offered and reject the right to receive the assets directly when you first put them into trust.

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We are ready to help.  We have a simple process for getting you from wherever you are now to executed and final documents.  It starts with an initial consultation, which is absolutely free.  You can use the button below to schedule a free information call, or simply give us a call at 781-784-2322.
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  • Home
  • Employment Law
    • Guide To Employment Law Content
    • Advice for Employers
    • Employment Contracts in Massachusetts
    • Discrimination in the Workplace
    • Employment Termination >
      • Massachusetts Paid Family Leave
      • Severance Pay
      • Unemployment in Massachusetts
      • Should I Accept a Severance?
    • Sexual Harassment at Work >
      • Sexual Harassment in a Small Business
      • Sexual Harassment and Non Disclosure Agreements
      • Sexual Harassment and Remote Work
    • Wage and Hour Laws >
      • Overtime Law >
        • Overtime Exemptions
        • Employee Travel Time
        • Federal or State Overtime Law
      • Massachusetts Wage Act >
        • Payment of Commissions
        • Wage Deductions
        • Late Payment of Wages
        • Paid Time Off
    • Independent Contractor Law >
      • Independent Contractor Test
      • Working As Independent Contractor
      • Hiring Independent Contractors in Massachusetts
      • Is My Independent Contractor Status Legal?
    • Non Compete Agreements >
      • Are non competes enforceable
      • Massachusetts Non Compete Act
      • Pre 2018 Massachusetts Non Competes
      • Can I Avoid My Non Compete?
    • Do I Have a Case?
  • Estate Planning
    • Guide To Estate Planning Content
    • Legacy Protection
    • Why You Need an Estate Plan
    • Why You Don't Have an Estate Plan
    • Estate Planning Documents >
      • Children with Special Needs
    • Planning for Assisted Living
    • Probate Process
  • Business Law
    • Guide To Business Law Content
    • Small Business Law
    • Business Contract Basics
    • Civil Suit Defense
    • Legal Issues for Start Ups
    • Trademark Basics
    • How to Incorporate
    • Sale of Business
  • About
    • Reviews
    • Slnlaw Offices
    • slnlaw core values
    • Publications and Interviews
    • New Client Intake and Consultation
    • Contact
  • Attorneys
    • Emily Smith-Lee >
      • 2018 Lawyer of the Year
    • Jenna Ordway
    • Rebecca Rogers
    • Sharleen Tinnin
    • Elijah Bresley
  • Legal FAQs
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    • Probate FAQs
    • Small Business FAQs
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