• Home»
  • Blog»
  • Revocable vs. Irrevocable Trusts: Which One is Right for You?

Revocable vs. Irrevocable Trusts: Which One is Right for You?

Share to:

Trusts are some of the most useful tools of estate planning. It offers you several benefits, like proper asset protection and distribution. More importantly, trusts can be tailored to your specific needs.

December 18, 2023
Author: NCH

Start Your Business with a Nevada LLC

The ONLY 5-Star Rated Business Formation Company Excellent

They come in different forms, but they typically fall into two categories: revocable and irrevocable. If you want to know which trust is best for your goals, we’re here to help. 

In this blog, we’ll discuss the difference between a revocable and irrevocable trust. We’ll also explore how to create a trust in five steps. Read on to discover the right trust for your estate planning needs.  

What is the Difference Between A Revocable and An Irrevocable Trust?

Revocable and irrevocable trusts are two of the most basic types of trusts you can get. 

Each one caters to different needs and goals in estate planning. 

Revocable Trust

A revocable living trust (RLT) is a type of trust that can be altered at any time during your lifetime. You can change terms, remove beneficiaries, and designate new ones. 

What makes RLTs great is their flexibility. You can easily make amendments to your document at your discretion. However, it’s not the best tool for reducing taxes. 

RLTs don’t come with tax breaks. All assets under your RLT will continue to incur estate taxes on their gains and income. Furthermore, they don’t have strong asset protection. 

Since you continue to have control over your RLTs, they will be subject to creditors and lawsuits. If someone decides to sue you, your trust assets can be used to satisfy any judgment you receive. 

Irrevocable Trust

Unlike RLTs, irrevocable trusts cannot be changed. The minute you sign your irrevocable trust, it’s set in stone. 

Irrevocable trusts can only be changed under exceedingly rare instances. The laws around amending this type of trust vary from one state to another. But typically, they can only be altered by the beneficiaries or by order of the court. 

One of the main advantages of irrevocable trusts is that they don’t have estate taxes. Upon your death, your trust assets will no longer be taxable. This benefit is especially important in states where estate tax rates are high. 

The only downside to irrevocable trusts is that they’re difficult to set up. You need the help of a licensed trust attorney to create one. More importantly, once the trust is done, you’ll no longer have control over your assets. 

You won’t be able to make changes should you change your mind about your benefactors. 

Revocable Living Trust vs. Irrevocable Trust: Which is Better

Now that we’ve explored the difference between revocable and irrevocable trusts, how do you know which suits your needs and goals?

You have to make certain considerations when choosing between the two trusts. A revocable living trust is best if:

  • You want to avoid the probate process.
  • You want full control over your estate even after you create your trust. 
  • The value of your assets is less than the federal estate tax exemption. 

On the other hand, an irrevocable trust is perfect for you if:

  • You don’t mind giving up control of your estate.
  • You want to avoid estate taxes.
  • You want stronger asset protections against creditors and lawsuits. 

Setting up a trust is not easy, so you must carefully consider which trust to create. 

How to Create A Trust in Five Steps

There are five steps to creating a trust:

Start your Nevada LLC in
24 hours guaranteed

You don’t need to live in Nevada to enjoy the best asset protection
and audit defense a Nevada LLC can provide.

Pick A Trust

The first step to creating a trust is identifying which trust you want to create. If you’re having trouble picking between revocable and irrevocable, you can use the considerations mentioned earlier as a guide. 

Pick Which Property to Include

There are several types of properties you can include in your trust, such as:

  • Houses and other real estate properties.
  • Stocks, bonds, mutual funds, and other non-retirement investment or brokerage accounts. 
  • Small business interests like stock from closely-held corporations or limited liability company shares.
  •  Savings and investment accounts.
  • Patents and copyrights. 
  • Precious metals, valuable works of art, antiquities, and other personal properties. 

It’s also worth noting that you can’t include the following types of properties in your trust:

  • Mortgaged property.
  • Financial accounts. 
  • Retirement accounts like IRAs, 401(k)s, and more. 
  • Medical savings accounts and life insurance policies. 
  • Vehicles like cars, trucks, boats, and airplanes. 

Choose Your Successor Trustee

A successor trustee will manage your estate and assets when you pass away. They must have integrity, objectivity, and good judgment. 

Decide Your Beneficiaries

Your beneficiaries are those who will receive the trust’s assets. Most people name their surviving spouse and children as their beneficiaries, but this is entirely up to your discretion. 

You can name your parents or siblings as your beneficiary if you want to. 

Create Your Trust Document

Your trust document should clearly state who your beneficiaries are, what properties are included in the trust, and its terms. It serves as the blueprint for how your assets will be managed and distributed, which is why its important that it’s accurate and aligned with your wishes. 

Although there are templates that you can use online, it would be best to consult an established trust attorney for help. 

A trust attorney will help you tailor your trust to your needs and wants. They bring invaluable expertise to the table, helping you navigate the complexities of trust law. They can guide you through decision-making, providing insights into the various types of trusts you can choose from and helping you find one that best suits your goals. 

Seek assistance from experts so you can protect your legacy for years to come. 

Start Planning For The Future Today

Ultimately, trusts are one of the most powerful tools you can use to safeguard you and your family’s future. Whether you choose a revocable or irrevocable trust, each type offers distinct advantages to help you plan for the future. 

If you need help setting up your trust, look no further than NCH. 

NCH is one of Nevada’s leading business formation specialists that offers estate planning services. Our team of trust attorneys will help you set up a comprehensive trust tailored to your unique needs and goals. 

With years of experience in estate planning, we have a proven track record of guiding individuals and families through the intricate process of creating trusts. 

Take the first step towards securing your family’s future by partnering with NCH. To learn more about our services, visit our website here or call us at 1-800-508-1729.

Disclaimer: The above material has been prepared for informational purposes only, containing opinions of the provider and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. Please consider consulting tax, legal, and accounting advisors before engaging in any transaction.

Share to:

Book Your FREE 1:1 Business Checkup

In only 15-30 minutes, our business formation experts will meet with you and:

  • Evaluate your current business structure and identify areas of improvement
  • Find potential problems before they become major issues
  • Develop a game plan for improving asset protection and minimizing tax liability
  • Reduce your exposure in the event of a business accident

Time slots are limited and fill quickly, so secure your spot now!


Speak With a Business Expert

Please fill out the necessary information:

By submitting this form, you agree to the Terms and Privacy policy, and that my contact information, including email address, may be shared with the sponsor.