There are many types of trusts, designed for a variety of purposes. In fact, a trust may be created for any legal purpose. Two terms that you will likely hear when planning a trust are revocable trusts and irrevocable trusts.
Revocable Trusts
A revocable trust may be amended or terminated by the settlor during the course of his or her life. This type of agreement provides flexibility and income to the living settlor. For example, the profits made off of interest could be given to the settlor, and only after he or she dies will the property included in the trust be transferred to the beneficiaries.
Irrevocable Trusts
Irrevocable trusts typically cannot be changed or amended, however, some states have adopted a version of the Uniform Trust Code that may allow the trust to be modified or terminated only if the settlor and all beneficiaries agree to the new terms. Irrevocable trusts are often used when planning for Medicaid needs or tax purposes, as it removes all incidents of ownership from the settlor’s taxable estate.
