Revocable Versus Irrevocable Trusts

The primary difference between a revocable trust and an irrevocable trust lies in the settlor's ability to modify or terminate the trust. A revocable trust allows the settlor to retain control over the trust assets and make changes or revoke the trust entirely during their lifetime. This means that the settlor can alter the terms of the trust, change beneficiaries, or dissolve the trust as they see fit.

In contrast, an irrevocable trust cannot be easily altered or terminated once it has been established. The settlor relinquishes control over the trust assets, and any modifications typically require the consent of the beneficiaries or a court order.

Additionally, the rights and duties associated with each type of trust differ. In a revocable trust, the rights of the beneficiaries are subject to the control of the settlor, and the trustee's duties are owed exclusively to the settlor. Conversely, in an irrevocable trust, the trustee's duties are owed to the beneficiaries, and the settlor generally cannot reclaim the trust assets or alter the trust terms without beneficiary consent or court approval.

Another significant difference is related to creditor claims. The assets in a revocable trust are considered part of the settlor's estate and are subject to claims by the settlor's creditors during their lifetime. However, assets in an irrevocable trust are typically protected from the settlor's creditors, provided the trust was not created with the intent to defraud creditors.

The Bottom Line:

In summary, the key distinctions between revocable and irrevocable trusts revolve around the settlor's control over the trust, the rights and duties of the trustee and beneficiaries, and the protection of trust assets from creditors. Most importantly, revocable trusts can be changed by the settlor, while irrevocable trusts cannot.

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What is a Revocable Trust?

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