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Why revocable trusts are better than irrevocable trusts

On Behalf of | Oct 10, 2024 | Trusts |

Adding a trust to one’s estate plan can be a positive step toward future financial goals. Depending on those goals, though, choosing between a revocable and irrevocable trust might be a significant decision with major implications.

Both types of trusts offer notable benefits, but revocable trusts provide more flexibility, control and ease of use than irrevocable trusts.

Control over assets

A revocable trust allows the grantor to maintain control over the assets placed in the trust. The grantor can modify or dissolve the trust at any point during their lifetime, offering flexibility as financial situations change. 

On the other hand, an irrevocable trust permanently transfers control of the assets to a trustee. Once created, the grantor cannot make changes or revoke the trust, limiting control over the assets.

Tax benefits and asset protection

Revocable trusts do not necessarily offer significant tax benefits or asset protection during the grantor’s lifetime. However, they can be instrumental in avoiding probate and ensuring a smooth transfer of assets after death. In this way, a revocable trust offers a certain degree of asset protection for beneficiaries while still providing the flexibility that an irrevocable trust lacks.  For many, this control and ease of use outweigh the potential tax benefits of an irrevocable trust.

Flexibility in managing life changes

Life events such as marriage, divorce or the birth of a child often require updates to an estate plan. A revocable trust allows the grantor to make these changes easily. In contrast, the rigidity of an irrevocable trust may prevent such adjustments, requiring more complex and time-consuming processes to address life changes.

Creating any type of trust serves to protect one’s assets and preserve the family’s privacy. Revocable trusts ultimately provide more flexibility, however, making them a better choice than irrevocable trusts for most people who prioritize maintaining control and ensuring adaptability in their estate plan.

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