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By: Scott Grossman on March 4th, 2024

When Does a Revocable Trust Become Irrevocable?

Trusts are a standard tool used to protect and distribute assets in estate planning. One critical decision in creating a trust is determining whether it should be revocable or irrevocable. Understanding the distinction between these two types of trusts is crucial, as it can have significant implications for the settlor and beneficiaries.

A revocable trust, also known as a living or inter vivos trust, allows the settlor to make changes or revoke the trust during their lifetime. On the other hand, an irrevocable trust cannot be altered or revoked once created. Making an irrevocable trust is typically based on the settlor’s objectives and the circumstances surrounding their estate.

Revocable trust benefits

Before delving into how a revocable trust becomes irrevocable, let’s first explore some of the benefits associated with revocable trusts. These advantages make them an attractive option for individuals who want flexibility and control over their assets during their lifetime.

1. Flexibility: A revocable trust allows the settlor to modify or revoke the trust at any time. That means they can add or remove assets, change beneficiaries, appoint new trustees, and adjust the terms and conditions of the trust as deemed necessary.

2. Privacy: Unlike wills, which are subject to public probate proceedings, revocable trusts offer a higher level of privacy. Since the trust does not go through probate, its contents and distribution details remain confidential.

3. Probate avoidance: Probate is the legal process through which the deceased person’s assets are distributed and their will is validated. By placing assets in a revocable trust, the settlor can avoid the probate process altogether, saving time, money, and potential disputes among beneficiaries.

4. Disability planning: Revocable trusts can include provisions for incapacity planning, allowing successor trustees to manage the settlor’s assets and make decisions on their behalf in the event of physical or mental incapacity.

Difference between revocable and irrevocable trust

When determining the point at which a revocable trust becomes irrevocable, it is crucial to understand the critical differences between the two types of trusts. These differences often inform the decision of when to make a trust irrevocable.

1. Control: As mentioned earlier, revocable trusts offer the settlor control and flexibility. They can change, add, or remove assets and modify beneficiaries or trustees. In contrast, irrevocable trusts relinquish control to a greater extent. Once created, the settlor can only make changes with the consent of the beneficiaries and/or trustee.

2. Asset protection: Irrevocable trusts are commonly used for asset protection. Assets in an irrevocable trust are usually shielded from creditors and potential lawsuits. This protection is unavailable with revocable trusts, as the assets are still considered part of the settlor’s estate.

3. Tax implications: An irrevocable trust may offer certain tax benefits, depending on the jurisdiction. For example, assets transferred to an irrevocable trust may be excluded from the settlor’s taxable estate, reducing potential estate taxes. Revocable trusts do not provide these tax planning opportunities.

4. Medicaid planning:  Medicaid planning often uses irrevocable trusts. By placing assets in an irrevocable trust, the settlor may meet the eligibility requirements for long-term care Medicaid benefits, as the assets are no longer considered part of their countable assets.

Revocable trust definition

As the name suggests, a revocable trust can be amended, modified, or revoked during the settlor’s lifetime. The settlor creates and funds it to hold and manage their assets. The settlor appoints themselves as the trustee, retaining complete control over the assets, income, and distributions.

The revocable trust’s primary purpose is to avoid probate and ensure a smooth and private transfer of assets upon the settlor’s death or incapacity. Since the trust remains revocable during the settlor’s lifetime, they can make changes as circumstances or personal preferences dictate.

It is important to note that although a revocable trust offers numerous benefits during a settlor’s lifetime, it does not provide the same level of asset protection as an irrevocable trust. Assets held in a revocable trust are still part of the settlor’s estate. They may be subject to estate taxes and claims by creditors.

While a revocable trust can become irrevocable upon the settlor’s death or incapacity, consulting with an experienced estate planning attorney is crucial to understanding the specific laws and regulations that apply in your jurisdiction. Estate planning laws can vary, and seeking professional guidance will ensure that you make informed decisions regarding the revocability or irrevocability of your trust.

In conclusion, deciding to make an irrevocable trust depends on the settlor’s objectives and the circumstances surrounding their estate. Individuals can make informed choices that best suit their needs and goals by understanding the benefits and differences between revocable and irrevocable trusts.

Probate Process 

It is vital to hire a probate attorney in California. Their expertise, guidance, and knowledge of California probate laws are invaluable throughout the probate process. Whether you are an executor, beneficiary, or concerned family member, TGLF can assist you in fulfilling the legal requirements, maximizing the estate’s value, and minimizing potential conflicts or delays.

By seeking the assistance of a probate attorney, you can navigate the complexities of the probate process with confidence and peace of mind. If you need more guidance in the probate process, check out our Overview of the California Probate process.

If your case is in California and you’d like an honest opinion, fill out our Get Help Now form. Or contact our office today to schedule your free 30-minute phone consultation by calling us at (888) 443-6590.