Q:

What are the differences between a revocable trust and an irrevocable trust?

A:

Quick Answer

The owner of a revocable trust can change or revoke it, whereas the owner of an irrevocable trust is powerless to change or cancel it, as stated by the Federal Deposit Insurance Corporation. A revocable trust remains the owner's asset, but irrevocable trusts become property of the beneficiary, reports About.com.

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What are the differences between a revocable trust and an irrevocable trust?
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Full Answer

The owner of a revocable trust has the ability to change the beneficiary or any other detail with a trust amendment, reports About.com. However, because a revocable trust is still a personal asset, it is not protected from creditors or Medicaid calculations and is subject to federal and state taxes.

Revocable trusts are mainly useful to facilitate manage of assets without court intervention if the owners of the trusts become incapacitated, according to U.S. News and World Report Money. They are also used as confidential substitutes for wills, as the disposition of trusts is private, and the assets pass directly to the beneficiary.

Irrevocable trusts have the advantage of being owned by the beneficiary, so they cannot be touched by creditors of the trust maker or taxed when the trust maker dies, states About.com. If the beneficiary of an irrevocable trust is a charity, then the trust maker or trust maker's estate receives an income tax deduction when the transfer of assets is made.

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