Revocable or Irrevocable Trust?

22 Mar 2023 · 1 min

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In this video, Jerry Taylor explains the fundamental distinctions between revocable and irrevocable trusts. He describes a revocable trust as the most common type, highlighting its flexibility— it can be changed, added to, or revoked at any time— and its primary benefit of allowing an estate to pass to heirs outside of probate, thereby keeping the process private and avoiding probate costs that can be about 5% of the estate's value. He then contrasts this with an irrevocable trust, which is essentially permanent and difficult to modify, but offers strong protection against lawsuits, creditors, bankruptcies, ex‑spouses, and Medicaid recovery. Additionally, for large estates, an irrevocable trust can provide significant tax advantages. The overall message emphasizes that the choice between the two trusts depends on the need for flexibility versus the desire for asset protection and tax benefits.

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What's the difference between a revocable and an irrevocable trust? The differences are significant. A revocable trust is the most common type of trust, and the main benefit associated with the revocable trust is that your estate can pass to your heirs outside of probate. You do— they do not have to go to court. Everything is done in private versus public proceedings at the courthouse, and a revocable trust avoids all the expenses associated with probate, which can be around 5% of the total value of the estate. As the name says, it can be revoked. It can be changed, added to, things taken away from. It's very, uh, flexible. Irrevocable trust is permanent. You can make changes to it, but it's very, very difficult. But it does provide significant protection against lawsuits and creditors and bankruptcies and ex-spouses and from Medicaid recovery. And with a large estate, there are significant tax benefits.