When it comes to estate planning, we get a lot of questions about trusts. While we are not estate planning attorneys, we help our clients ensure that their estate plan is aligned with their financial plan and overall life goals.

Trusts are very useful estate planning tools that allow you to specify how exactly you want your assets to be handled—either during your lifetime or after you’re gone. There are two main types of trusts: revocable trusts and irrevocable trusts. 

Here, we’ll help you understand the difference between the two and then go on to explain the advantages and disadvantages of a revocable trust and whether and how you should use one in your estate plan.

What Is a Trust? 

A trust is a legal arrangement where you transfer assets to a separate entity (the trust) to be managed by a trustee/trustees for the benefit of your chosen beneficiaries.

Trusts can help you avoid probate, maintain privacy, and provide financial control beyond your lifetime. They’re a key part of many estate plans, but whether you need one depends on your situation.

Do You Need a Trust?

Generally, individuals with complex estates, significant assets, or specific wishes about how their property is managed after death may find that a revocable trust suits their needs better than a simple will. While not everyone needs a trust, it can be helpful in situations like:

• You want to avoid probate. Probate can be expensive and time-consuming. A trust allows your heirs to skip the process and for your assets to be distributed per your wishes.
• You have minor children or dependents. A trust lets you control when and how your assets are distributed, allowing you to specify criteria that must be met before any money leaves the trust.
• You own property in multiple states. Without a trust, each state may require a separate probate process.
• You want privacy. Unlike a will, a trust is not a public document so all of the wishes that you spell out in a trust will remain private only to you, your trustees, and your attorney.

If none of these apply, a well-structured will might be enough for your estate plan.

What Is a Revocable Living Trust?

A revocable living trust is a type of trust you create while you're alive (also called an inter vivos trust) and can change or revoke at any time, as long as you’re mentally competent.

With a revocable trust, you usually serve as your own trustee, managing the assets as you normally would. If something happens to you, your named successor trustee steps in and follows your instructions—no probate needed.

While the terms living trust vs revocable trust are sometimes used interchangeably, it is helpful to understand that by definition, a revocable trust is always a living trust because it must be created and managed during the grantor’s lifetime. Once the grantor dies, the trust typically becomes irrevocable and continues based on the terms set within it.

What is an Irrevocable Trust?

An irrevocable trust is a type of trust that, once created, cannot be changed, modified, or revoked (except in very limited circumstances). When you transfer assets into an irrevocable trust, you give up ownership and control of them. Instead, a trustee manages the assets according to the trust's terms for the benefit of the beneficiaries.

Because you no longer own the assets, they are generally protected from creditors and can be used for long-term wealth preservation and potentially help reduce estate taxes.

What’s the Difference Between a Revocable and Irrevocable Trust?

The biggest difference between a revocable trust and an irrevocable trust is control vs. protection:

• Revocable Trust – You maintain control and can change it anytime, but it doesn’t necessarily protect your assets from creditors or lawsuits.
• Irrevocable Trust – Once created, it generally cannot be changed, but it might offer tax benefits and stronger asset protection.

If you want flexibility, a revocable trust is the way to go. If you need protection from creditors or estate tax benefits, an irrevocable trust might be better.

Benefits of a Revocable Trust

Revocable living trusts come with several advantages that can make them an essential part of your estate planning. Here’s a breakdown of some of the main benefits:

• Avoidance of Probate – One of the biggest advantages of a revocable trust is its ability to help your estate avoid probate. Because assets in the trust are transferred directly to beneficiaries upon your death, they bypass the lengthy and costly probate process, ensuring a quicker and smoother distribution of assets.

• Flexibility and Control – Since a revocable trust is modifiable, you can change its terms or even revoke it entirely at any time while you are alive and mentally competent. This flexibility allows you to adapt the trust as your life circumstances change, such as marriage, divorce, or changes in financial situations.

• Privacy – Unlike a will, which becomes a public document during probate, a revocable trust is private. The distribution of your assets remains confidential, and the terms of your trust are not subject to public record, providing an additional layer of privacy for you and your beneficiaries.

• Asset Management During Incapacity – A revocable trust allows you to designate a successor trustee who will manage your assets if you become incapacitated. This ensures that your financial affairs are handled according to your wishes without the need for a court-appointed guardian or conservator.

• Control Over Distribution – A revocable trust allows you to specify how and when your assets are distributed to beneficiaries, which is useful for managing inheritances to minors, ensuring that beneficiaries with special needs receive proper care, or providing for loved ones in a way that aligns with your goals.

Examples of using a revocable trust to control distribution of assets:

Let’s say you have a child who is still a minor and you want to ensure that they receive their inheritance in a responsible way. If you pass away, a revocable trust allows you to specify that your child will receive their inheritance in installments or when they reach a certain age, rather than a lump sum.

Another example is using a revocable trust to help a family member with special needs. In your revocable trust, you can set up provisions that direct the trust to provide for their care while preserving their eligibility for government benefits, ensuring their financial and medical needs are met without jeopardizing their support.

Disadvantages of Revocable Living Trusts

Despite the many benefits, it is important to consider the disadvantages of revocable living trusts and answer the question, what is the downside to a living trust? 

• Taxable Estate Inclusion – Because you retain control over the trust, its assets are generally considered part of your taxable estate. This means they do not receive the same tax benefits or protections that certain irrevocable trusts might offer.

• Limited Asset Protection – While a revocable trust helps manage assets during your lifetime, it does not provide strong protection from creditors. Since you still control the trust, creditors may be able to claim its assets in lawsuits or financial disputes.

• Not a Complete Estate Plan – A revocable trust helps avoid probate, but it does not replace the need for a will, power of attorney, or other estate planning documents. Without proper planning, some assets may still go through probate or be subject to unintended legal complications.

For individuals seeking stronger creditor protection, other legal structures might be more appropriate.

Types of Revocable Trusts and Their Uses

Here are some common types of revocable trusts and how they can be used:

• Basic Revocable Living Trust – The most common type of revocable trust, used to avoid probate and manage assets during your lifetime and after your passing. It provides clear instructions for distributing assets and can include real estate, bank accounts, investments, and other personal property.

• Joint Revocable Trust – Often used by married couples, this trust allows both spouses to manage assets together. It ensures the surviving spouse retains control over the trust and its assets after the first spouse passes away, making it easier to handle estate planning as a couple.

• Revocable Trust as part of Business Succession Plan – A revocable trust can be structured to include a business succession plan, ensuring a smooth transition of ownership and management in the event of death or incapacitation. This can be used to designate a successor to run the business, protecting its long-term viability. A buy-sell agreement can be incorporated into the trust, outlining how ownership will be transferred and ensuring business continuity. Click here to read more about how to sell your business and key considerations.

These types of trusts offer significant benefits in managing your estate, providing for loved ones, and planning for the future. They can include both personal and business assets, ensuring smooth transitions and protecting your legacy.

The Process of Creating a Revocable Trust

Setting up a revocable trust is an important legal process, and many people choose to work with an estate planning attorney to ensure everything is properly structured. 

The process involves several key steps:

1. Identify Your Assets – List everything you want to include in the trust, such as real estate, bank accounts, and investments.
2. Draft the Trust Document – This legal document outlines how your assets will be managed during your lifetime and distributed after your passing.
3. Execute the Trust Properly – The trust document must be signed and notarized to be legally valid.
4. Fund the Trust – You must transfer ownership of your assets into the trust’s name to ensure they are properly managed under its terms.

A well-drafted trust helps protect your assets, ensures your wishes are carried out, and prevents costly mistakes that could undermine your estate plan.

Is Your Estate Plan Up to Date and in Line with Your Financial Plan?

Beyond the initial setup, regular trust and estate plan reviews are crucial. Major life events—such as marriage, divorce, the birth of a child, or changes in financial circumstances—may require updates to keep your plan aligned with your current situation. This is why our team of financial advisors will ask about your estate plan during your initial meeting and ongoing reviews to ensure that everything in line with your financial plan. If you’d like some guidance with figuring out what kind of trust may be best for your situation, schedule a call with one of our financial advisors in Tampa us here.

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Frequently Asked Questions About Revocable Trusts

1. What assets should not be placed in a revocable trust?
   While most assets can be placed into a revocable trust, some should be kept outside, such as:

• Retirement accounts (like IRAs or 401(k)s) – These accounts typically have their own beneficiary designations, which override any instructions in your trust.
• Life insurance policies – Similar to retirement accounts, life insurance policies usually have a beneficiary designation and are generally not placed in a trust unless you set up an irrevocable life insurance trust (ILIT).

2. What happens to a revocable trust when the grantor dies?
   When the grantor (the person who created the trust) dies, the revocable trust becomes irrevocable, meaning no further changes can be made to it. The successor trustee steps in to manage and distribute the assets according to the terms of the trust. Since the trust avoids probate, the distribution process is typically faster and more private than through a will.
3. Can creditors go after a revocable trust after death?
   Yes, creditors can go after the assets in a revocable trust after the grantor’s death. Since the grantor maintained control over the assets during their lifetime, those assets are part of the deceased’s estate and can be subject to claims from creditors. However, creditors must make their claims within a certain period, and the estate may have to go through a probate-like process to settle those debts.
4. Do revocable trusts file tax returns?
   Although the trust itself typically does not file a separate tax return, managing the trust requires diligent record-keeping and coordination with your personal tax filings. The IRS treats the trust as part of your estate during your lifetime, meaning you report any income generated by the trust’s assets on your personal tax return. After your death, the trust becomes a separate tax entity and will need to file its own returns.
5. How much does a revocable trust cost?
   The cost of setting up a revocable trust can vary based on your estate planning attorney's fees. While the initial expense of creating a revocable trust can be higher than a will, the benefits, such as avoiding probate and keeping your estate plan current, may justify the cost. However, the ongoing administration of the trust could also come with additional fees, which might not be ideal for everyone, depending on the complexity of the estate.