Revocable vs Irrevocable Trust: Which One Do You Need?
One allows you to change your mind; the other locks your assets away forever. The choice depends on whether you value flexibility or protection.
Revocable
Changeable
Avoids ProbateFlexible
Irrevocable
Permanent
Asset ProtectionLocked
Probate
Skipped
Both TrustsSpeed
Control vs. Protection
The main difference is simple: Can you take the assets back?
| Feature | Revocable (Living) | Irrevocable |
|---|---|---|
| Control | 100% (You are Boss) | 0% (Trustee is Boss) |
| Creditor Protection | None | High (Ironclad) |
| Tax ID | Your SSN | New EIN |
| Probate | Avoids Probate | Avoids Probate |
What is Probate?
The slow, expensive court process of distributing a deceased person’s assets.
Both trusts bypass this, allowing instant transfer to heirs.
Asset Safety Level
| Goal | Winner |
|---|---|
| Flexibility | Revocable |
| Tax / Medicaid | Irrevocable |
Revocable Trust: The “Living Trust”
Most families need this. You transfer your house and accounts into the trust, but you appoint yourself as the “Trustee.”
Why Choose It?
- Changeable: You can amend it, dissolve it, or swap assets whenever you want.
- Privacy: Unlike a Will (which becomes public record), a Trust stays private.
- Incapacity: If you get sick (coma/dementia), your “Successor Trustee” steps in immediately without court interference.
Irrevocable Trust: The “Fortress”
This is serious business. Once you sign the papers, the assets legally belong to the trust, not you. You usually cannot be the Trustee.
Why Would You Do This?
- Estate Tax Reduction: Removes assets from your taxable estate (for the ultra-wealthy).
- Medicaid Planning: To qualify for nursing home coverage, you must show you have few assets. Moving them here helps (after 5 years).
Critical Warning: The 5-Year Look-Back
You cannot just dump assets into an Irrevocable Trust right before entering a nursing home.
Medicaid has a 5-year look-back period. If you transferred assets within that window, you will be penalized.
Frequently Asked Questions
Does a Revocable Trust protect me from lawsuits?
No. Since you can take the money back anytime, a judge can force you to take it back to pay a creditor.
How much does it cost to set up?
A DIY Revocable Trust costs $200-$500 online. An attorney-drafted Irrevocable Trust is complex and typically costs $2,000 – $5,000+.