An irrevocable trust cannot be changed once it is in effect but a revocable trust can be modified. While a revocable trust is designed to eliminate probate, an irrevocable trust can eliminate estate taxes and offer asset protection. Both are inter vivos trusts i.e. trusts that go into effect during an individual’s lifetime.
Comparison chart
 | Irrevocable Trust | Revocable Trust |
|---|---|---|
| Definition | An irrevocable trust is a trust that cannot be terminated once it goes into effect. | A revocable trust, also known as a revocable living trust, is a trust that can be terminated at a later date and assets are transferred back to the settlor. |
| Property Owner from tax perspective | Trust | Individual |
| Asset protection | Yes. The Grantor no longer owns the assets after they are put in an irrevocable trust. So assets are protected from any creditors or liability. | No. Since the Grantor of the trust does not give up control of the assets, they are not protected from liability. |
| Estate tax charged in some countries like US? | No. Since the deceased Grantor did not own the assets at the time of death, the assets in an irrevocable trust are not considered part of their estate. | Yes. The assets in a revocable trust are considered part of the Grantor's estate and so are subject to estate taxes, but only to the extent that they exceed the state and federal thresholds. |
| Avoid probate | Yes | Yes |
| Change Letter of wishes during settlor's lifetime? | Yes | Yes |
Inheritance
Probate
A major advantage of living trusts over wills is that wills are required to go through probate — a lengthy, costly and public process in court — before heirs receive their inheritance. Both revocable and irrevocable trusts are living — aka inter vivos — trusts; both these types of trusts help the estate avoid the probate process.
Estate Taxes
Where revocable trusts differ from irrevocable trusts is in their tax treatment. All assets (and income) in a revocable trust is viewed essentially as belonging to the benefactor. However, the benefactor of an irrevocable trust no longer technically owns the property in the trust. So assets in an irrevocable trust are not included when calculating estate taxes upon their death. Property and other assets in revocable trusts, on the other hand, are included when calculating estate taxes.
Asset protection
Properties in an irrevocable trust are protected if the owner is sued.
Properties in a revocable trust have no creditor protection.
Modification
An irrevocable trust cannot be changed and the property cannot be retrieved.
A revocable trust can be modified through a trust agreement or revoked entirely through an amendment and restatement.
Usage
Irrevocable trusts are used by individuals who wish to avoid estate tax when their assets are passed on, and by those who wish to protect their assets from creditors. Irrevocable trusts can also be used for charitable estate planning – if the trustmaker transfers the assets into a charitable trust while they are still alive, they will receive a charitable income tax deduction in the year the transfer is made.
Revocable trusts are usually used by individuals who wish to plan for a mental disability, as assets in these trusts can be managed by an individual’s Disability Trustee instead of a court-supervised guardian. They can also be used to avoid probate, which is the court-supervised process of locating and determining the value of a deceased person’s assets, paying their final taxes and then distributing the remainder to heirs. Instead, assets in a revocable trust will pass directly to the beneficiaries. Finally, they can be used to keep the details of property and its beneficiaries private.
References
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Comments: Irrevocable Trust vs Revocable Trust