Why most estate planning trusts are revocable (and when they shouldn't be)

One of the most common questions I hear from clients is about the difference between revocable and irrevocable trusts. While both can be valuable tools in your estate planning toolbox, there's a reason most estate planning trusts are established as revocable trusts. Let's explore why, and identify situations where an irrevocable trust might be the better option. 

The Appeal of Revocable Trusts 

Revocable trusts, often called "living trusts," are the standard recommendation for most of my clients for several important reasons: 

Flexibility: Life changes, and your estate plan should be able to change with it. Marriage, divorce, births, deaths, asset acquisition or liquidation — all these life events may necessitate updates to your trust. A revocable trust allows you to amend, modify, or even completely revoke your trust as circumstances change. 

Control: With a revocable trust, you maintain complete control over your assets during your lifetime. You can be both the trustee and the beneficiary, allowing you to manage and use those assets exactly as you did before creating the trust. 

Probate Avoidance: Like irrevocable trusts, revocable trusts allow your assets to pass to beneficiaries without going through the time-consuming, public (not private), and potentially expensive probate court process. 

Privacy: Unlike wills, which become public record when probated, trusts maintain your family's privacy regarding asset distribution and financial matters. 

When Irrevocable Is the Right Choice 

Despite the clear advantages of revocable trusts, there are specific situations where an irrevocable trust makes more sense: 

Medicaid Planning: For seniors concerned about preserving assets while qualifying for Medicaid to cover long-term care costs, irrevocable trusts can be valuable. Assets placed in properly structured irrevocable trusts at least five years before applying for Medicaid may not count toward eligibility limits.  

Asset Protection: If you work in a profession with high liability risk (physicians, attorneys, business owners), an irrevocable trust can protect certain assets from future creditors or legal judgments. Because you legally relinquish ownership of the assets, they're generally beyond the reach of creditors.  

Special Needs Planning: For families with disabled dependents who receive government benefits, a Special Needs Trust must be irrevocable to preserve benefit eligibility while providing supplemental support. 

Estate Tax Planning: While Idaho has no state imposed estate tax, families with substantial assets concerned about federal estate tax may benefit from irrevocable trusts that remove assets from their taxable estate.  

Legacy Protection: Some clients (especially in blended families of second marriages) want absolute certainty that assets will be used exactly as they intend, without possibility of later changes. Irrevocable trusts can ensure your wishes are followed precisely, even after you're gone. 

All of these situations where irrevocable trusts may be advantageous are very complicated areas of the law, and should only be pursued with expert legal assistance.  

The Trade-Off 

The primary disadvantage of irrevocable trusts is right in the name — once established, they generally cannot be changed or revoked. You're permanently transferring assets out of your name and control. Additionally, irrevocable trusts often involve more complex tax considerations and typically require separate tax returns. 

This is why, for most Idaho families, we start with revocable trusts as the foundation of their estate plan. We can always add specialized irrevocable trusts for specific purposes when necessary. 

Making the Right Choice 

Every family's situation is unique, which is why personalized estate planning advice is so valuable. Talk to an estate planning expert to determine what is right for your situation. 

My law firm is currently offering free telephonic, electronic, or in-person consultations concerning creating or reviewing estate planning documents.   

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Robert J. Green is an Elder Law, Trust, Estate, & Guardianship Attorney and the owner of Kootenai Law Group, PLLC in Coeur d’Alene. If you have questions about estate planning, probates, wills, trusts, powers of attorney, guardianships, Medicaid planning, or VA Benefit planning, contact Kootenai Law at 208-765-6555, Info@KootenaiLaw.com, or visit www.KootenaiLaw.com.

This has been presented as general information and not as legal advice. Do not engage in legal decision-making without the advice of a competent attorney after discussion of your specific circumstances.