In the normal course of estate planning, revocable trusts are usually recommended for individuals who are seeking to eliminate probate requirements and retain control over the trust property during their lifetime. Not so with an irrevocable trust. The irrevocable trust does not allow for a change in directives once the trust is created. This is the main difference between a revocable trust and an irrevocable trust.
Revocable trusts often revert to irrevocable trusts upon the death of the grantor, the person who sets up and contributes to the trust. This ensures that your successor trustee won’t make changes to your directives after you die. You can also set up an irrevocable trust during your lifetime that allows you to contribute deposits to the trust, while eliminating your ability to cancel or change the trust.
Both revocable and irrevocable trusts offer certain benefits for the grantors and beneficiaries, such as eliminating the probate requirement for your will and resolving possible areas of conflict between your beneficiaries. The main difference between a revocable trust and an irrevocable trust is the possibility of making changes to the directives. A revocable trust allows you to keep your options open and restructure your designations as you like. An irrevocable trust does not allow your beneficiary to change the provisions of the trust after your death.
Placing your assets into an irrevocable trust while you are living will eliminate your options of changing your plans if you have a change of heart. Most importantly, because the trust is irrevocable, any assets transferred into it are no longer considered to be your property. The net result is that not only are they protected from legal adversaries and creditors, but they're also exempt from federal and state estate taxes.
The key to deciding if the irrevocable trust is right for you is whether or not you think you will need to restructure the trust during your lifetime. If you are totally sure you will not need to restructure your designation, the irrevocable trust will work for you. If this is not the case, you may want to consider the revocable trust.