Firm Logo
We’re Here When You Need Us

We Have Your Best
Interest In Mind

Photo of Professionals at Law Office of Rebecca L. Evans
  1. Home
  2.  » 
  3. Estate Planning
  4.  » 3 ways to benefit from revocable and irrevocable trusts

3 ways to benefit from revocable and irrevocable trusts

On Behalf of | Aug 31, 2023 | Estate Planning |

When it comes to estate planning, trusts play a pivotal role in managing assets and ensuring financial security for loved ones.

While both serve important roles, the differences between revocable and irrevocable trusts deliver different planning results.

1. Control dynamics

The revocable trust, as the name implies, empowers the grantor with the ability to modify, amend or entirely revoke the terms of the trust. This flexibility provides a dynamic approach, enabling adjustments in beneficiaries, assets and provisions as circumstances change. In contrast, the irrevocable trust has a rigid structure. Once established, its terms generally remain unalterable. Though restrictive, it bolsters asset protection and enforces a clear separation from the grantor’s estate.

2. Safeguard assets

In a revocable trust, assets within the trust remain subject to potential creditors’ claims and estate taxes. While the trust may bypass the probate process, it may not provide optimal shielding against financial vulnerabilities. Conversely, an irrevocable trust offers enhanced asset protection. Since the grantor relinquishes control over assets placed into the trust, these assets usually evade creditors’ reach.

3. Tax ramifications

A revocable trust does not create a separate taxable entity, as the grantor remains the owner for tax purposes. Any income or gains generated within the trust get attributed to the grantor’s tax return. An irrevocable trust establishes a distinct taxable entity. The trust itself files its tax return, and income generated within the trust is generally taxed at different rates.

For the 34% of Americans with a will, the time may come to take estate planning even further. Revocable and irrevocable trusts both offer tailored ways to protect assets and secure a resilient financial future.

FindLaw Network
Photo of Deborah N Arthur and Rebecca L. Evans