Irrevocable vs. Revocable Trusts: A Case Study

Susan, 72, is retired and widowed with two adult sons. Several years ago, Susan transferred her primary residence into an Irrevocable Trust, naming her sons as both beneficiaries and trustees. At the time, the strategy felt like a smart way to protect the home and help ensure a smooth transfer of assets to her children in the future.

Five years into her retirement, Susan is considering selling her home and downsizing as it is a large house that has been costly to maintain. She begins to have concerns that since the home is owned in an Irrevocable Trust, will she have limited control over her most valuable asset?

Susan decides to meet with her Financial Professional, Ron, and his firm’s endorsed attorney, John. John discusses the difference between a Revocable Trust and an Irrevocable Trust. He explains that since Susan had set up the trust as Irrevocable, she no longer has control of the assets and that her sons, as trustees, will have to approve the sale of the property and the purchase of her new home. Susan expresses that she has a great relationship with her sons and that this will not be a problem. Rob suggests they all meet to discuss next steps. At the conclusion of their meeting, Susan and her sons were grateful for the advice and guidance that both Ron and John provided.

In a follow up call with Ron, John mentions to him that his clients should always take into consideration the differences between a Revocable Trust, where they have control of the assets and an Irrevocable Trust, as it relates to their long-term objectives for estate planning purposes. Providing clarity that while an Irrevocable Trust may seem meaningful today, it may limit flexibly in the future.

After the call, Ron felt confident that no matter what objectives his clients may have in lifetime planning, through his firm’s Wealth Management Alliances, there will always be a solution.

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