Estate plans come in different types. The most common one is a will document, which goes through a formal court process called probate that administers the division of assets. Those who want to avoid probate usually create a revocable trust, where assets are placed under a private family agreement and are automatically transferred to the named beneficiaries upon death.
Revocable trusts are often confused with irrevocable trusts, however, there are key differences between the two.
Revocable Trust vs. Irrevocable Trust
From the names of these two types of trusts, their differences can be implied. In essence, a revocable trust is revocable, which means it can be changed at any time. The trust owner can put assets in the trust as they please and also take them out when needed. Similar to a will, a revocable trust can be amended.
On the other hand, irrevocable trusts are not as flexible and cannot be changed or revoked. Once it is created, any assets that are placed in the irrevocable trust cannot be taken back or removed. They become part of the trust permanently.
Can a Revocable Trust Become Irrevocable?
Revocable trusts and irrevocable trusts may be different. However, a revocable trust can turn irrevocable upon a triggering event, which is usually death. A person who has a revocable trust can do whatever they want with the assets or the trust itself, amending and changing it as they please.
When the trust owner passes away, the trust automatically becomes irrevocable and permanent. The assets then stop becoming the deceased’s estate and now belong to the trust. They then go to the named beneficiaries as per the private family agreement.
Because of the differences between the two types of trusts, as well as the point when a revocable trust becomes irrevocable, it’s easy to confuse them and make minor mistakes that can spell disaster to an estate plan. Hiring a revocable trust lawyer to assist in drawing out a revocable or irrevocable trust is highly recommended.