Dear Liz: What is the difference between a revocable trust and an irrevocable trust? Which one is better? I am a widow with two sons who will inherit my estate. My net worth is $1.4 million, including a mortgage-free house.
Answer: The two types of trusts serve different functions, so neither is inherently better than the other.
Revocable trusts can be changed as long as the trust creator — that would be you — is still alive. You retain control over the assets in the trust and can sell or dispose of them as you wish. The most common revocable trust is a living trust, which allows estates to avoid the court process known as probate.
Irrevocable trusts typically can’t be changed. They are often used to protect assets or reduce an estate for tax purposes. The trust creator generally loses control over what happens to the assets in the trust. Irrevocable trusts are typically more complicated to set up and to administer, and may require a separate tax return.
An estate planning attorney can review your situation and advise which kind of trust, if any, might be best for your situation.