Trusts can be essential tools of any estate-planning strategy. You can transfer all sorts of assets like cash and real estate to these trusts, which then can be distributed to your heirs based upon your wishes upon death.
But not all trusts are created equal. In fact, there are several different types of trusts. Each has its own advantages and disadvantages. Today, we’ll take a look at a common type of trust: a living trust. As the name implies, these are trusts created in your lifetime for the benefit of your heirs after death.
These trusts can hold various types of assets such as bank and savings accounts, brokerage accounts, real estate, a vehicle, and family heirlooms.
Many people also turn to living trusts because they avoid probate. This is the lengthy and often costly legal process of having the courts determine how to distribute your assets after death. And because these trusts avoid probate, they don’t become public record. This gives the trust creator or grantor a degree of security.
But it’s important to know there are two main types of living trusts: revocable and irrevocable. Neither is a one-size-fits-all. Each has its own pros and cons. So let’s take a deeper look into these two types of trusts to determine which is right for you.
What Is a Revocable Trust, and Who Is It Best For?
A revocable trust gives you ultimate flexibility. You can name yourself as the trustee (i.e., a person who controls the trust). All assets within the trust remain in your control. You are free to amend the trust as you please at any time. For example, you can change beneficiaries to certain assets or remove these assets from the trust altogether.
It also offers a certain degree of safety. This is because a revocable trust allows you to designate a successor trustee. This individual can manage the trust and its assets based on your wishes should you become incapacitated.
So a revocable trust could be best for those looking for flexibility, control, and ease.
But here’s the downside: a revocable trust doesn’t offer much in the way of shielding you from estate taxes. Because the assets in the trust remain in your control, the government deems them part of your taxable estate, and they are thus subject to estate taxes.
However, this may not be an issue for many. Estate taxes are generally levied on estates valued at $15 million or more in 2026 for individuals before assets can be transferred to heirs. Because of these high parameters, most Americans don’t need to worry about estate taxes. In fact, most advisers suggest that you should seek out a revocable trust if you have assets of around $150,000 or less.
But there’s another key drawback of a revocable trust you should know about: A revocable trust doesn’t offer asset protection. This means the assets in the trust could be open to creditors, debt collectors, or plaintiffs in a lawsuit. So if this is something you may be worried about, a revocable trust may not be your best bet.
What’s an Irrevocable Trust, and Who Is It Best For?
With an irrevocable trust, you completely lose control of the assets that you transfer to the trust. Once established, you can’t make any changes to the trust or even terminate it. So you can’t change beneficiaries without their consent, for example. You can’t even name yourself as the trustee. Someone else would need to serve as trustee.
But here’s the good part. An irrevocable trust could reduce or eliminate estate taxes. If structured right, the assets transferred to the trust technically leave your estate, thereby making it smaller. So your estate could end up falling below the scope of the estate tax. This is why irrevocable trusts typically make more sense for affluent individuals and families.
Moreover, an irrevocable trust shields assets from creditors and debt collectors. So if asset protection is at the top of your estate planning list, an irrevocable trust may be right for you.
Irrevocable trusts can also help when it comes to means-based benefits programs like Medicaid. When done right, assets transferred to an irrevocable trust more than five years before applying for benefits typically aren’t considered available resources.
However, the rules for government programs such as Medicaid are constantly changing. So you should consult with a qualified estate planning professional when forming an irrevocable trust with these goals in mind.
The Bottom Line
Living trusts can be crucial to your estate-planning strategy when structured properly. There are two types of living trusts. Revocable trusts are generally suitable for people with smaller amounts of assets who want control, flexibility, and easy transfer of assets. Irrevocable trusts may better suit those with larger estates who want to shield assets from estate taxes, as well as creditors and debt collectors.
But overall, the trust that’s right for you depends on your individual needs and goals. Some may even find that both would fit into their estate planning strategy. But both types of trusts can be incredibly complex. So it’s important to seek the help of a qualified estate planning attorney when building the right trust.
The Epoch Times copyright © 2026. The views and opinions expressed are those of the authors. They are meant for general informational purposes only and should not be construed or interpreted as a recommendation or solicitation. The Epoch Times does not provide investment, tax, legal, financial planning, estate planning, or any other personal finance advice. The Epoch Times holds no liability for the accuracy or timeliness of the information provided.
