Comparing Revocable Trusts to Irrevocable Trusts: What’s the Difference? 


Q. My husband and I have decided to get our Estate Planning in order. We’ve determined that a trust is the way we should go when it comes to Estate Planning. The question is: should we consider a revocable living trust or an irrevocable trust, such as the Living Trust Plus that you offer? What are the differences and similarities? Thanks for your help! 

A. You are making a smart decision to consider creating a trust for your Estate Planning needs. Assets in a trust avoid probate and seamlessly pass from the original owner to the beneficiaries or remain in a protective trust for the beneficiaries. But what type of trust is right for your situation? Should you consider a revocable living trust or the Living Trust Plus®? Everyone’s situation is different, and no answer is the correct answer for everyone. However, in this article I will explain some of the differences and similarities between revocable living trusts and irrevocable living trusts, including our irrevocable Living Trust Plus.  

What Are the Advantages of Trusts in Estate Planning? 

First, let’s look at the advantages of trusts in Estate Planning. Nearly all trusts share a common benefit – to avoid probate, the legal process otherwise required to transfer ownership of assets from a deceased individual’s name to a living beneficiary. Probate can happen when you die with a will or when you die intestate (without a will). These are the advantages of trusts:  

  • When you fund your trust with money, real estate, and other assets, you provide a way for ownership of those assets to move to a person or persons of your choice (typically the named beneficiaries of the trust) so that probate becomes unnecessary.  
  • You can decide exactly when your beneficiary should inherit, and you can indicate those wishes in your documents.  
  • The terms of a living trust don’t become a matter of public record because a living trust is not subject to probate or filing with the state or recordation. However, if you simply leave a will, it must be filed with the court to open probate. Anyone and everyone can simply look it up to find out what you owned and who inherited what. 

Revocable Trusts vs. Irrevocable Trusts 

All trusts are either revocable or irrevocable. There are several types of revocable trusts and even more different types of irrevocable trusts. The basic difference is that if a trust is revocable, the person(s) who created it (called the trust creator, trust maker, settlor, or grantor) can revoke it and take all the assets out of it while they are alive. If a trust is irrevocable, just as the word implies, the creator(s)  cannot revoke it. That is all irrevocable means. Please do not read other limitations into the word “irrevocable.” Contrary to what many people (including many attorneys who do not specialize in preparing irrevocable trusts) believe, irrevocable does not mean “unchangeable” or “set in stone.” Depending on the type of irrevocable trust, sometimes the creator(s) can change almost everything about an irrevocable trust, such as with the Living Trust Plus, which is irrevocable, but where the creator(s) can change the trustees and beneficiaries at any time. Another feature of an irrevocable trust is that generally the creator(s) of the trust cannot take any of the assets out of it, but even this is not always the case, as in the case of the Living Trust Plus Income Retention Trust (sometimes called an “income only trust”), where the creator(s) retain the right to receive the income generated by the assets inside the trust. Another huge misconception is that an irrevocable trust can never be terminated. Again, if you create an irrevocable trust, you cannot revoke it. But under the Uniform Trust Code, which is the law in 37 states, all irrevocable trusts can be terminated by agreement of all interested parties, which usually means the creator(s), the trustee(s), and the beneficiaries. 

Here are some other distinctive characteristics of revocable trusts and irrevocable trusts: 

Revocable Living Trusts 

The primary goal of a revocable living trust is to protect your assets from the nightmare of probate. These assets will pass directly to the beneficiaries named in the trust agreement. There’s no need for probate court involvement. These are some of the other advantages of Revocable Living Trusts: 

  • You retain complete ownership and control of the property in the trust.  
  • You can change all of the terms, including the trustees and beneficiaries. 
  • If you have second thoughts about a provision in the trust, or if you change your mind about who should be a beneficiary, you can modify the trust’s terms with a trust amendment. 
  • You can revoke or undo the entire trust if you decide that it just doesn’t serve your purposes any longer. 
  • It allows you to plan for mental incapacity. Assets held in the name of a revocable living trust at the time the grantor becomes mentally incapacitated can be managed by a successor trustee, someone the creator names to take over in the event he or she can no longer manage the trust themselves. 
  • It protects the privacy of your property and beneficiaries when you die. It doesn’t become a public record for all the world to see. Your assets and who you’ve decided to leave your estate to will remain a private family matter. As mentioned earlier, a Last Will and Testament, along with the court-required inventory and annual accountings, become public records that anyone can see and read as soon as they’re submitted to the court. 

The main limitation of a revocable living trust is that all assets transferred to the trust are still considered your own personal assets when it comes to lawsuits and nursing home expenses. All assets in a revocable living trust are considered to be owned by you (and your spouse if you are married) for purposes of lawsuits and Medicaid and in connection with Veterans Aid and Attendance. Here’s why: The law takes the position that if you take the assets out of the trust at any time, you still own the assets. 

Irrevocable Living Trust Plus® 

There are many types of irrevocable trusts, but by far the most common irrevocable trust that we prepare for our clients is the Living Trust Plus, a special type of irrevocable trust that protects your assets from probate plus lawsuits plus the potentially catastrophic expenses of long-term care.  

  • The Living Trust Plus protects your assets from the expenses of long-term care by making those assets exempt in connection with Veterans Aid and Attendance (after the assets have been in trust for at least three years) benefits and Medicaid benefits (after the assets have been in trust for at least five years).  
  • With the Living Trust Plus, you give away ownership of the property to the trust, but you can retain full investment and management control of the trust assets by being trustee of your own trust, just as you would with a revocable living trust. 
  • The Living Trust Plus irrevocable trust protects your assets from lawsuits, creditors, and judgments. Because you can’t take the property back after you transfer ownership into the Living Trust Plus, your creditors or a judgment holder can’t reach it, either. It’s not yours any longer. 
  • The Living Trust Plus enables you to qualify for government benefits. Assets that you own count against you for purposes of qualifying for certain government benefits, including Medicaid and Veterans Aid and Attendance. 

The Living Trust Plus functions much like a revocable living trust and maintains much of the flexibility of a revocable living trust but protects your assets from the expenses and complexities of probate PLUS lawsuits PLUS nursing home expenses while you’re living. The Living Trust Plus protects your assets from lawsuits, medical expenses, and — most importantly for the 99.8 percent of Americans who are NOT among the ultra-wealthy — from the devastating costs of nursing home care. 

Get Your Estate Planning in Order at the Farr Law Firm 

In addition to wills and trusts, Estate Planning lawyers and trust attorneys also discuss beneficiary designations, powers of attorney, charitable trusts and life insurance trusts, and much more. Please read my articles about Estate Planning to learn more! 

When you have a plan in place, you have peace of mind that you are well-protected and that you’ve communicated to loved ones what to do should something happen to you. The key is to prepare your incapacity plan, estate plan, and long-term care plan before you need it because with all of life’s uncertainties, you never know when that day will come. 

As you can see, the major benefits of the Living Trust are avoiding probate and protection from incapacity. With a revocable living trust, you can provide how the real estate and other trust property are to be distributed at your death. You direct who you want to administer your estate, who you want to receive your property and assets, and who should care for your minor children, among other important things. Having these documents in order will help your loved ones avoid probate and will give you the peace of mind that your wishes are known and can be taken care of in an orderly fashion. 

For most Americans over age 65, a Living Trust Plus® is the preferable form of estate planning because it includes asset protection for you and can also include asset protection for your children or other descendants. For purposes of Medicaid eligibility, this type of trust is the only type of self-settled asset protection trust that allows you to retain an interest in the trust while also protecting your assets from being counted by Medicaid and by the Veterans Administration. 

If you’re a client or potential client who would like more information about revocable living trusts or the Living Trust Plus, please call our office to make an appointment: 

Fairfax Estate Planning Attorney: 703-691-1888 
Fredericksburg Elder Law Attorney: 540-479-1435 
Maryland Estate Lawyer: 301-519-8041 
DC Living Trust Attorney: 202-587-2797

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About Evan H Farr, CELA, CAP

Evan H. Farr is a 4-time Best-Selling author in the field of Elder Law and Estate Planning. In addition to being one of approximately 500 Certified Elder Law Attorneys in the Country, Evan is one of approximately 100 members of the Council of Advanced Practitioners of the National Academy of Elder Law Attorneys and is a Charter Member of the Academy of Special Needs Planners.