Final answer:
The key difference between a revocable trust and an irrevocable trust is that a revocable trust can be modified or terminated by the grantor during their lifetime, while an irrevocable trust cannot be easily changed once established.
Step-by-step explanation:
Difference Between Revocable and Irrevocable Trust
A trust is a crucial element in estate planning. Revocable and irrevocable trusts are two primary types of trusts that determine how assets are managed after one's death. With a revocable trust, the grantor (the person who creates the trust) maintains control over the trust assets during their lifetime. They may alter, amend, or completely revoke the trust as they see fit. Upon the grantor's death, a revocable trust usually becomes irrevocable, meaning that its terms can no longer be modified.
Conversely, an irrevocable trust, once created, typically cannot be changed or revoked by the grantor. This means that any assets placed within an irrevocable trust are no longer under the control of the grantor, and the trust's terms are set in stone, barring some exceptional circumstances. Additionally, because of this relinquishment of control, irrevocable trusts often provide certain tax advantages and asset protection benefits not available with revocable trusts.
Understanding the differences between these types of trusts is important for anyone engaged in estate planning, as they each carry implications for control over assets and potential financial benefits.