Planning your estate involves more than just writing a will—it’s about protecting your assets, avoiding probate, and ensuring your wishes are honored. One of the most effective tools for achieving these goals is a revocable living trust. But how does it differ from an irrevocable trust, and which option is right for your unique needs?
At Doane & Doane, PA, our Palm Beach County estate planning attorneys are here to help you understand your options. In this guide, we break down the differences between revocable and irrevocable living trusts so you can make an informed decision.
What Is a Living Trust?
A living trust, sometimes referred to as an inter vivos trust, is a legal structure that holds your assets while you’re alive and directs their distribution after you pass away. Once you create the trust, you transfer ownership of your assets into it. You maintain control of those assets during your lifetime, and upon your death, your designated trustee will manage and distribute them according to your wishes.
There are two main types of living trusts:
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Revocable Living Trust
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Irrevocable Living Trust
Each serves a different purpose and offers distinct benefits.
What Is a Revocable Living Trust?
A revocable living trust gives you maximum control and flexibility. As the trust’s creator, or grantor, you can modify, update, or revoke the trust at any time. This includes changing beneficiaries, adding or removing assets, or even terminating the trust entirely.
Upon your death, the trust becomes irrevocable, and your named successor trustee takes over to distribute your assets according to the trust terms—without the need for probate.
Advantages of a Revocable Living Trust
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Avoids Probate: Assets in the trust are passed directly to beneficiaries, bypassing the court process.
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Flexible and Easy to Update: You can make changes at any time as your life circumstances evolve.
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Maintains Privacy: Unlike a will, a living trust is not made public.
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Supports Incapacity Planning: If you become unable to manage your affairs, your successor trustee can step in immediately.
Disadvantages of a Revocable Living Trust
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No Asset Protection: Since you maintain control, creditors can still access the assets.
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Doesn’t Reduce Estate Taxes: Assets in a revocable trust are still part of your taxable estate.
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Requires Ongoing Management: You must ensure assets are properly titled and the trust remains updated.
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Initial Costs: Creating and maintaining a revocable trust can be more expensive than drafting a simple will.
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Limited Medicaid Planning Benefits: Assets in a revocable trust count toward Medicaid eligibility.
What Is an Irrevocable Living Trust?
An irrevocable trust differs significantly in that it cannot be changed or revoked without the consent of the beneficiaries (and sometimes court approval). Once you place assets in an irrevocable trust, you give up ownership and control over them.
Although it’s more restrictive, an irrevocable trust can offer stronger legal and tax protections.
Revocable vs. Irrevocable Trust: Key Differences
| Feature | Revocable Living Trust | Irrevocable Living Trust |
|---|---|---|
| Control | Grantor retains full control | Control is transferred to the trustee |
| Modifications | Allowed at any time | Requires legal/beneficiary approval |
| Probate Avoidance | Yes | Yes |
| Tax Advantages | None | Can reduce estate and income taxes |
| Asset Protection | Limited | Strong protection from creditors and lawsuits |
| Medicaid Planning | Not effective | Often used for eligibility planning |
Common Types of Irrevocable Trusts
Here are three popular types of irrevocable trusts:
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AB Trust: Commonly used by married couples to reduce estate taxes. Upon the first spouse’s death, the trust splits into two parts—one for the surviving spouse and one that remains in trust.
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Irrevocable Life Insurance Trust (ILIT): Removes life insurance proceeds from your taxable estate, providing tax benefits for your heirs.
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Charitable Trust: Allows you to donate assets to charity while potentially retaining some benefit during your lifetime or providing for heirs.
Benefits of an Irrevocable Trust
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Asset Protection: Assets are owned by the trust, not you—offering a shield from creditors and lawsuits.
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Tax Savings: Assets are removed from your taxable estate, which may lower estate tax liability.
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Helps with Government Program Eligibility: An irrevocable trust can help you qualify for programs like Medicaid by reducing your countable assets.
Drawbacks of an Irrevocable Trust
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Loss of Control: You no longer own or directly manage the assets.
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Difficult to Change: Modifications often require legal action or beneficiary consent.
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Less Access: You typically cannot use trust assets for personal benefit.
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Complexity and Cost: These trusts are more expensive to create and maintain.
Choosing the Right Trust for Your Estate Plan
Both revocable and irrevocable living trusts offer valuable tools for estate planning, but your decision will depend on your goals:
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Choose a revocable living trust if you want to maintain control, avoid probate, and plan for incapacity.
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Choose an irrevocable trust if you need asset protection, want to reduce estate taxes, or plan for Medicaid eligibility.
Get Help from a Revocable Living Trust Attorney in Palm Beach County
At Doane & Doane, PA, we’ve helped families throughout South Florida build estate plans that protect their assets and provide peace of mind. Whether you’re considering a revocable living trust or exploring irrevocable options, our experienced estate planning attorneys will help you choose the best strategy for your situation.
We offer the personalized service of a boutique firm, backed by nearly two decades of legal excellence.
