The two types of trusts are self-descriptive. When a grantor creates an Irrevocable Trust, he is irrevocably transferring whatever property he is choosing to transfer to the Trust. He has given the property away, and has not retained any rights to revoke the trust or to take back the property. Irrevocable Trusts are often used for gift and estate tax planning, medicaid planning, and asset protection planning. They are also useful in situations in which the Beneficiaries are not ready to receive the property outright, or in which the Grantor might want to protect the assets from a Beneficiary’s creditors. Depending on what the goal is, it is possible for the Grantor to also be Trustee of the Trust, but often he is not. But the key is that it is a permanent transfer of the property to the Trust by the Grantor which can not be revoked. If you and/or your spouse have significant assets, call me or speak with an attorney about whether an Irrevocable Trust is right for you.
A Revocable Trust (or Revocable Living Trust) is a Trust that can be revoked or amended by the Grantor at any time for any reason. The Grantor can cancel the Trust entirely, change its terms, and add or remove property to the trust. In most cases, as long as they are healthy and mentally competent, the Grantor is also the Trustee of their own Trust. A Revocable Trust becomes Irrevocable upon the Grantor’s death. Like a Will, it provides how property is disposed of upon the Grantor’s death, and how property should be managed if the Grantor is still alive, but becomes incapacitated.
Absent a trust, a person's estate must go through the court system, often referred to as "probate," regardless whether a Will exists. The sole purpose of a Trust is to avoid probate upon the Grantor’s death, and to avoid a Guardianship if they are alive and incapacitated. In case you are wondering, you probably want to avoid probate unless you are ok leaving the fate of your estate to a random judge. However, in order to successfully avoid probate, all of a Grantor’s assets must be retitled in the name of the Trust. Any asset subject to probate not owned by the Trust would require to be probated. In addition, a Guardianship can likely be avoided by having a properly drafted and executed Durable Power of Attorney and Healthcare Power of Attorney.
Because of their ability to bypass probate, I usually recommend that clients invest in a Trust, and to make sure to properly fund and administer it, even if they already have a Will. If you have any questions regarding Wills, Trusts, or Power of Attorney documents, I will be happy to sit down with you to discuss your options.