How does an irrevocable trust differ from a revocable trust?

An irrevocable trust is characterized by its inability to be changed or revoked after its creation. This permanence creates a distinct legal separation between the assets held in the trust and the grantor. Once the assets are transferred into an irrevocable trust, the grantor relinquishes control over those assets, which means that the trust cannot be modified or terminated at the whim of the grantor. This feature is often utilized for estate planning, asset protection, and tax purposes.

On the other hand, a revocable trust allows the grantor to make changes, withdraw assets, or even revoke the trust entirely while they are alive. This flexibility can be advantageous for individuals who wish to maintain control over their assets and adjust their estate plan as circumstances change.

Understanding this fundamental difference is crucial for trust and fiduciary advisors, as it impacts how trust assets are managed and how they may be treated for tax and legal purposes. The other options inaccurately define the nature of trusts and their purposes or attributes, which can lead to misunderstanding of a key principle in estate planning.