Ownership and Control of Trust Property

• When the grantor transfers assets to an irrevocable trust, she no longer has legal title to those assets. It also means that, in most instances, the assets in the irrevocable trust are protected from the grantor's personal creditors. When assets are transferred to a revocable trust, the grantor still has control of the assets and they are generally not protected from creditors.
  
  

Grantor's Ability to Change the Trust

• When the grantor creates a revocable trust, he retains the option of changing the trust. The grantor of a revocable trust can choose to take all of the assets from the trust for any reason and cancel the trust. The grantor of a revocable can also change the beneficiaries or the terms of when the trust will pay the beneficiaries. Conversely, once the grantor has created an irrevocable trust, she no longer has any control of the trust assets or the terms of the trust.
  
  

Taxation Issues

• Both revocable and irrevocable trusts provide tax benefits and the differences in the benefits each provides is very complex. Generally, the assets in a revocable trust will be considered part of the grantor's net worth and will be subject to taxes. Assets in a revocable trust will also be taxed; however, the trust will be taxed as a separate entity, not as a portion of the grantor's worth. Irrevocable trusts can therefore be structured to fall into a lower tax bracket than the grantor would as an individual.
  
  

Purpose

• Although both revocable and irrevocable trusts are used as substitutes for wills, it is far more common for individuals to use revocable wills to pass their assets to their heirs. Irrevocable trusts are often used to provide money to minor beneficiaries while the grantor is still living. Irrevocable trusts are also commonly used to manage life insurance proceeds.