A revocable trust and living trust are separate terms that describe the same thing: a trust in which the terms can be changed at any time. An irrevocable trust describes a trust that cannot be modified after it is created without the consent of the beneficiaries.

Revocable Trust | Irrevocable Trust:

The two basic types of trusts are revocable trust, also known as revocable living trust or simply a living trust. and a irrevocable trust. Revocable trusts are trusts that can be changed at any time. An irrevocable trust cannot be modified after it is created without consent of the beneficiaries.

A trust is a legal entity set up to manage assets. Once the trust is set up and assets are in place, a third party known as a trustee, manages the trust. The trustee will determine how the assets are invested and to whom they are distributed to, once the owner of the trust has passed away. The trustee must manage the trust in accordance with the guidelines laid out when the trust was created.

Revocable (Living) Trust:

A revocable trust may be changed at any time. Beneficiaries can be removed or added, and the stipulations as to how the assets are managed may be modified. However, the assets managed in the trusts are not shielded from creditors in the same way they are shielded in an irrevocable trust. If the owner of the trust is sued, the assets can be ordered liquidated to satisfy judgments put forth. When the owner of the revocable trust dies, the assets are held in trust are subject to both state and federal estate taxes.

Irrevocable Trust:

Except under very rare circumstances, the terms set in an irrevocable trust are unchangeable once the agreement is signed. The benefits of selecting an irrevocable trust mainly lies in the tax benefits. Irrevocable trusts remove the assets from the benefactor’s taxable estate, meaning the assets are not subject to estate tax upon death, and they relieve the benefactor of tax responsibility for any income generated by the assets.

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