The grantor can change a revocable trust at any time during its life, as long as it is competent. Generally, an irrevocable trust cannot be changed without a court order or without the approval of all of the trust's beneficiaries. The creator of an active trust decides if it can be changed or revoked. If you include a paragraph in the trust that says it can be changed or revoked, then it's called a “revocable active trust.” In that case, you can easily change or revoke your trust.
The two basic types of trusts are a revocable trust, also known as a revocable active trust or simply a living trust, and an irrevocable trust. The biggest difference between revocable and irrevocable trusts is that the terms and stipulations of a revocable trust can be changed at any time, while the terms of an irrevocable trust cannot be changed once it is created, unless all beneficiaries agree. They will now have to carefully investigate a trustee and a trust protector acting as a supervisory trustee of the trust. Knowing which one is better, a revocable trust or an irrevocable trust, really just depends on the level of protection you need.
Because a revocable trust can be changed at any time, the assets of the trust are still considered the property of the grantor. Trusts are created during a person's lifetime to ensure that assets are used in any way that the person establishing the trust deems appropriate. Also known as a revocable living trust, this can be a good option if you want to establish a trust while maintaining control over your wealth and assets while you're alive. Frequently used charitable trusts include charitable remnant trusts, charitable principal trusts, and income trusts.
Given the flexibility of revocable or living trusts, in contrast to the rigidity of an irrevocable trust, it seems that all trusts should be revocable. When the owner of a revocable trust dies, assets held in the trust are also subject to state and federal wealth taxes. A revocable trust also takes effect as soon as the legal document is signed and funded, once the assets are titled in the trust's name. While most people create active trusts to benefit their families, you can name anyone as a beneficiary, including yourself.
However, because the assets held in the trust are no longer owned by the grantor or part of his estate, irrevocable trusts can protect assets from taxes and creditors. There are some key differences between a revocable and an irrevocable trust, and a revocable trust can be changed, but an irrevocable trust cannot be changed. Irrevocable trusts require their own separate tax identification numbers and the filing of separate tax returns, as the trust's assets are removed from each other's estate. It's very difficult to dissolve an irrevocable trust, and a revocable trust doesn't necessarily protect your assets from creditors.
