Revocable vs. Irrevocable Trusts: What Is the Difference?

Two people can both say they have a trust while holding very different powers over the property inside it. One may be able to change the beneficiaries next week. The other may have given up that ability when the trust was created.

The words revocable and irrevocable help explain that difference.

What does revocable mean?

A revocable trust can generally be changed or revoked by its settlor, the person who creates it, under the trust’s terms and applicable law.

Iowa Code section 633A.3102 provides a default rule allowing revocation or modification unless the trust expressly states that it is irrevocable. That default does not apply to instruments executed before July 1, 2000. The section also addresses methods of making a change and trusts with multiple settlors.

So the first step is to read the document. A casual note announcing different beneficiaries may not satisfy the method the trust requires.

Does irrevocable mean nothing can ever change?

An irrevocable trust generally does not give the settlor the same unilateral freedom to take it back. However, saying that no change is ever possible would be too broad.

Iowa Code section 633A.2203 allows court modification of dispositive provisions or termination in specified circumstances involving beneficiary consent and the trust’s material purpose. Other provisions may also matter to a particular request.

That is a different process from a settlor simply deciding to rewrite the trust. The reason for the change, the interests involved, and the governing law need review.

Which one is better?

That question depends on what the trust is meant to accomplish. Is the goal management during incapacity, an organized transfer after death, or a more specialized arrangement? Each purpose raises different questions about control and flexibility.

A revocable living trust also should not be assumed to remove its property from the settlor’s taxable estate. The power to change or revoke it has consequences beyond who can revise the document.

Before transferring property, ask who can change the terms, who can receive distributions, and what happens if circumstances change. Understanding the control retained or surrendered is more useful than choosing a trust based only on its label.

Tyler ThompsonAuthor