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There are many important decisions that need to be made when creating a trust, and one of the most crucial is whether to set up a revocable trust vs. irrevocable trust. This decision can have a significant impact on your estate plan and should not be made lightly.
In this article, we will explore the key differences between revocable and irrevocable trusts so that you can make an informed decision about which type is right for you.
Revocable trusts and living trusts are the same thing, but usually people interpret them as different terms. A revocable trust is a type of trust that allows the owner or grantor to revoke the terms he or she sets in first instances. Therefore, the grantor (meaning, the person that setup the trust) can make changes to the trust as needed, which is mostly helpful if circumstances change for the owner.
An irrevocable trust is a type of trust that cannot be amended or revoked by the person who created it. Once it is created, it is set in stone. This is helpful in situations where you want to ensure that your estate plan is permanent. But in exchange for making your trust permanent you can gain significant tax, estate planning and asset protection benefits.
People use irrevocable trusts for different reasons. Some people use them to protect their money from creditors, while others use them to avoid estate taxes. Irrevocable trusts also allow the grantor to remain in control of the trust assets, which is a benefit that revocable trusts do not offer.
Once an irrevocable trust is created, it set forever. This might not be helpful your circumstances change after you created the trust. For example, you might want to be able to change the trust if something happens to you and you can’t manage the trust anymore.
Most living trusts are revocable, but some people use irrevocable trusts. It’s always best to decide according to your specific situation and the goals you have for the trust.
Want to learn more about trusts? Here’s a blog post we shared on trust funds and how to set them up. However, if you have specific questions, you can schedule a meeting with our team and we’ll help you out!
We have built a platform to give everyone access to the tax planning tools of the ultra-rich like Mark Zuckerberg (Facebook founder), Phil Knight (Nike founder) and others. Valur makes it simple and seamless for our customers to utilize the tax advantaged structures that are otherwise expensive and inaccessible to build their wealth more efficiently. From picking the best strategy to taking care of all the setup and ongoing overhead, we make take care of it and make it easy.