Revocable vs Irrevocable Trust: 3 Key Differences

October 4, 2023
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8 min read

Whether you’re an entrepreneur, doctor, CEO, or any other high net worth individual, understanding how to use trusts to protect your assets from frivolous lawsuits and overly aggressive judges is vital for your own financial prosperity, your mental health, and the future prosperity of your beneficiaries.

The greater your wealth, the more you need to protect it. 

Unfortunately, many high net worth individuals choose to “protect” their assets in revocable trusts. But while it might provide a minimal barrier to entry against low-risk legal attacks, a revocable trust won’t work in the eventuality you’re brought to court and ordered to make payments using those assets, fair or otherwise. When it comes to asset protection, an irrevocable trust is the only way to practice smart, effective defense.

Why? It’s because of three key differences between revocable vs. irrevocable trusts. Let’s break them down. 

Asset Protection is a Spectrum

Any entrepreneur worth their salt, like you, has already been embroiled in at least a few legal scraps. You know from that experience that legal protection isn’t a one-step process. And there’s a big difference between the budget-friendly option and the premium – powerful – option.

Truth be told, there are many different levels of asset protection you can pursue depending on your goals, your wealth, and exactly what potential financial threats you need to think about. 

Looking to easily secure your property and savings and pass them on to your children? A revocable trust will get the job done just fine. But if you’re an eight-figure entrepreneur or operate in a high-risk profession, say, and want to avoid a lawsuit from a disgruntled patient, you’ll need something tougher – something that even you won’t be able to legally breach if you’re ordered to do so.

Asset protection is ultimately about one thing: if you are taken to court, what can happen to your wealth? All that matters is effectiveness.

Enter irrevocable trusts. These fiduciary instruments are perfect for sealing your assets into what might as well be a steel vault – if they are set up properly. If an LLC is a house of straw, then a revocable trust is a house of wood. An irrevocable trust is a house of bricks. And, to finish the Three Little Pigs analogy, a Dominion-style irrevocable trust is a house of titanium. No wolfish lawyer will be able to blow it down.

To understand how irrevocable trusts work and why they are ideal, you first need to understand their more flexible counterparts.

Revocable Trusts in a Nutshell

A revocable trust – typically called a living trust – is a financial instrument that, like all trusts, lets some third party (the trustee) hold financial or estate assets on behalf of a beneficiary or several beneficiaries.

Perhaps the prototypical example of a revocable trust is an estate with land. An elderly person with a good amount of land they wish to grant to their beneficiaries after they die sets up a trust and names their grandkids as beneficiaries. Until they pass away, the trust’s assets are managed by a trustee, preventing them from being modified or sold. Once the trust’s conditions are met, the beneficiaries get the land and any other assets included in the trust.

That’s a perfect setup for this type of client, but for asset protection, a revocable trust’s inherent weakness is in the name: it’s revocable or changeable. This can be a good or bad thing, depending on what you’re after.

With a revocable trust, an owner can make the following changes at any time:

  • Remove beneficiaries
  • Designate new beneficiaries
  • Modify trust stipulations
  • Take assets out of the trust (by modifying the stipulations)

For example, say that you are a high net worth individual and you want to protect your investments and other assets. One day, you’re sued by someone with flimsy reasoning. Despite this, the judge orders you to pay the lawsuit damages demanded by the plaintiff.

What happens if you tell the judge, “My assets are in a trust?”

The judge will look right back at you and say, "So change the trust," if you're the owner. In this way, a revocable trust is practically no real defense against court orders and other types of financial attacks.

Why Would You Use a Revocable Trust?

That being said, revocable trusts do have some use cases. Here are a couple of examples:

  • If you want to avoid the probate process – which can be time-consuming and costly – when determining the validity of a will, a revocable trust can circumvent it. As a side benefit, by avoiding probate, you’ll preserve much of the privacy of the information related to your entrusted assets (probate court is usually open to the public). Note, of course, that irrevocable trusts are also highly useful for avoiding probate – and in some cases, they might even be superior to revocable trusts
  • Placing assets in a revocable trust also makes them immediately available to a successor trustee. This can be useful in certain situations, like when you need to raise cash to pay for debts or estate taxes
  • Revocable trusts ensure uninterrupted investment management if the trust’s grantor is incapacitated or dies unexpectedly 

All in all, revocable trusts have their place. If you work with Dominion, we’ll admit to as much, and we’ve even helped clients in the past set them up for a variety of financial goals. But if you’re looking for real asset protection, revocable trusts – ironically – can’t be trusted. 

At their core revocable trusts are for family planning and estate management after your death, period. They’re not designed for asset protection at all, nor are they intended to be solutions for the unique, complex problems wealthy people experience.

Irrevocable Trusts Explained

If a revocable trust is changeable and flexible, an irrevocable trust is the opposite: it cannot be changed except with great difficulty.

Put simply, when you sign the terms of an irrevocable trust, those terms become set in legal stone right from the get-go. Unless very rare conditions are met, you (the trust owner or grantor) can’t make changes to the trust.

In most cases, the only time an irrevocable trust’s terms can be altered is if all of the beneficiaries agree to changes. The benefit to your asset protection strategy should be plain!

Let’s revisit a hypothetical scenario where you are called by a court judge to make a lawsuit or some other legal payment using assets in your trust. If that trust is irrevocable, you can tell the judge, “I can’t legally make changes to the trust or take assets out of it.” That’s 100% true and 100% legal!

If the judge or lawsuit plaintiff wants what’s in the trust, they’ll have to get the permission of the beneficiaries. It’s a much harder, more time-consuming process, and it’s oftentimes impossible to complete – particularly if your irrevocable trust is set up by knowledgeable advisors at Dominion.

The Key Differences Between Revocable vs. Irrevocable Trusts

When you’re thinking about your legal options – and how to protect your wealth from pursuers – considering the big differences between revocable vs. irrevocable trusts is key. 

Trust Changeability (Especially in the Context of a Lawsuit) – The BIG Difference

We already went over this trust above, but it bears reiterating, particularly in lawsuit defense contexts. Any legal vehicle that separates you from your assets provides SOME level of asset protection. The question that really matters is: how much do you need? Fundamentally revocable trusts are changeable and are thus unsophisticated compared to irrevocable trusts.

Indeed, revocable trusts are pretty fragile when you think of the avenues that a legal opponent could take to get at your assets. All it takes is one court order to render the protection of a revocable trust null and void.

In contrast, an irrevocable trust is much stronger on the spectrum of asset protection. If it’s set up properly, it could be fairly described as naval invasion-proof! If you're looking to guarantee maximum protection of your wealth for future beneficiaries, an irrevocable trust has few equals. After all, you can’t legally abide by a court order telling you to alter a trust or take assets out of it if the trust’s terms don’t allow for that order.

Given this difference, it’s a no-brainer to set up an irrevocable trust for asset protection.

Trustee Control

Although the changeability of the trust is the big difference between the revocable and irrevocable instruments, they are also distinct because the trustee of an irrevocable trust can’t be ordered to compromise the trust, even if they’re the original grantor/settlor.

Again, this has major implications for asset protection. If you’re the grantor of an irrevocable trust, you can’t be ordered to compromise it or change it, even if you’re the overseer or trustee of the trust. With a revocable trust, if you name yourself as the trustee after setting it up as the grantor, you get additional “control”. But you’ll also be obliged to abide by court orders, should they ever come. 

Irrevocable Trusts and Their Role in Asset Protection

The facts are plain: irrevocable trusts are far superior for asset protection and long-term wealth defense compared to revocable trusts. Because of this, there are two big cases where an irrevocable trust could serve you and your estate quite well.

Lawsuit Protection

Likely touched on above, an irrevocable trust provides your estate with unparalleled lawsuit protection.

Imagine a circumstance where you want to protect your carefully accumulated wealth from future creditors. However, you know that there’s a high likelihood that a creditor may come after your assets sooner rather than later, or as soon as you pass away.

To protect those assets, you place them in an irrevocable trust. Even if you’re sued, or if creditors come after your assets to settle unpaid debts after the death of the borrower, they won’t be able to touch the assets within your trust instrument.

That wealth isn’t available to you or to the trustee. Every beneficiary named for the trust has to agree to access the assets within. This kind of protection is advantageous for all kinds of high net worth individuals, such as:

  • Entrepreneurs
  • Doctors and surgeons
  • Lawyers
  • CEOs and other business executives
  • Landowners
  • Lottery winners
  • And more

Tax Benefits

In addition to the lawsuit protection you’ll enjoy with an irrevocable trust, you’ll also benefit from a few key tax breaks.

When you put taxable estate assets into an irrevocable trust (or a revocable trust, for that matter), those assets may not be subject to estate tax upon the grantor’s death. On top of that, trust benefactors may not have any tax responsibilities for income generated by the assets.

That’s why many high net worth people with valuable land put those real estate assets into irrevocable trusts. Not only does this preserve those assets for future generations, but it also enables the assets to generate more income that can be used by the family or future beneficiaries.

Tax benefits protect your assets by saving your estate money. Long-term wealth generation is just as important as short-term lawsuit defense for wealthy individuals, especially if they’re concerned with financial stability for their families in perpetuity.

Setting Up an Irrevocable Trust

The truth is clear: an irrevocable trust is the best way to protect your overall assets for a long time to come. However, it’s not a good idea to try to set one of these up with anyone other than knowledgeable experts.

Irrevocable trusts are highly complex, with a lot of different parts, legal terms, and potential stumbling blocks you might run into. Revocable trusts are, by comparison, exceedingly simple – which reflects their fragility and versatile natures.


When push comes to shove, you need your assets protected by the strongest legal barricades possible. Given what we explained, there’s no reason to assume a revocable trust will get the job done and protect you from legal orders that compromise your wealth.

Instead, you’re much better off contacting the financial experts at Dominion. Not only do we have expertise helping high net worth individuals just like you secure and protect their assets from the long-term, but we’re also well-equipped and ready to assist in setting up an irrevocable trust now.


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