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What is the difference between a Revocable Trust and Irrevocable Trust?

Posted: September 3, 2017

 A Revocable Trust is a trust established by a Trust Agreement that the Grantor may amend or revoke at any time during the Grantor’s lifetime. 

 1. The assets of a revocable trust are included in the Grantor’s taxable estate for estate tax purposes upon the Grantor’s death pursuant to IRC §2038.

 2. The assets of a Revocable Trust are available to the Grantor’s creditors and considered the Grantor’s assets for Medicaid planning purposes.

 3. Revocable Trusts typically use the Grantor’s social security number as its tax identification number.

 4. The taxable activity of a Revocable Trust is reported on the Grantor’s personal income tax returns. 

An Irrevocable Trust is a trust established by a Trust Agreement that is irrevocable. 

 1. Revocable trusts become irrevocable upon the death of the person(s) who had the power to amend and revoke the Trust Agreement. 

 2. Irrevocable Trusts can provide estate tax planning benefits, asset protection benefits, and distribution planning benefits.

 3. Irrevocable Trusts should obtain a unique tax identification number from the Internal Revenue Service. 

 4. Trustees of Irrevocable Trusts typically need to file separate income tax returns for the trust. 

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