What is the difference between a revocable and an irrevocable trust?

The distinction between a revocable trust and an irrevocable trust primarily lies in the ability to modify or revoke the trust after its creation. A revocable trust can be altered or revoked by the grantor at any time during their lifetime. This flexibility allows the grantor to make changes to the terms of the trust or even dissolve it entirely if their circumstances or intentions change.

In contrast, once an irrevocable trust is established, the grantor relinquishes their ability to modify or revoke it. This characteristic is often advantageous for asset protection and estate planning purposes, as the assets placed in an irrevocable trust are typically beyond the reach of creditors and are excluded from the grantor's estate for tax purposes.

Understanding this fundamental difference is crucial for any estate planning strategy, as it impacts how assets are managed, how beneficiaries are affected, and how taxes are calculated. Other choices may present aspects of trust characteristics, but they do not accurately capture the primary distinction concerning the ability to make changes to the trust agreements.