Irrevocable vs. Revocable Trust in Kentucky: Which is Right?

Trusts are an important part of estate planning for many Kentucky families, but choosing the right type of trust can feel overwhelming. Two of the most common options are revocable trusts and irrevocable trusts. While both can help manage and distribute assets, they serve different purposes and come with different legal consequences.

Understanding how each type of trust works under Kentucky law can help you decide which option best fits your goals.

What Is a Revocable Trust?

A revocable trust, sometimes called a living trust, is a trust that can be changed or revoked by the person who creates it, known as the grantor. While the grantor is alive and mentally competent, they typically retain full control over the trust’s assets.

Common features of a revocable trust include:

• The ability to amend or cancel the trust at any time.
• Continued control over assets placed in the trust.
• Use of trust assets for the grantor’s benefit during life.

In Kentucky, revocable trusts are often used to avoid probate, maintain privacy, and provide for smooth asset management if the grantor becomes incapacitated.

What Is an Irrevocable Trust?

An irrevocable trust generally cannot be changed or revoked once it is created, except under very limited circumstances. When assets are transferred into an irrevocable trust, the grantor typically gives up ownership and control over those assets.

Irrevocable trusts may be used to:

• Protect assets from certain creditors.
• Reduce potential estate tax exposure.
• Plan for long-term care or Medicaid eligibility.
• Provide structured gifts to beneficiaries.

Because of the permanent nature of an irrevocable trust, careful planning is essential before assets are transferred.

Key Differences Between Revocable and Irrevocable Trusts

The primary difference between these trusts lies in control and flexibility.

Control and Flexibility

• A revocable trust allows ongoing changes and access to assets.
• An irrevocable trust limits control once it is established.

Asset Protection

• Assets in a revocable trust are generally still considered the grantor’s property.
• Assets in an irrevocable trust may be protected from certain claims, depending on the trust structure.

Tax and Medicaid Considerations

Revocable trusts do not provide tax benefits during the grantor’s lifetime.

Irrevocable trusts may offer tax advantages or assist with Medicaid planning, though strict rules apply.

Which Trust Is Right for You?

The right trust depends on your personal circumstances and goals.

A revocable trust may be appropriate if you want:

• Control over your assets during your lifetime.
• A way to avoid probate.
• Flexibility to adjust your plan as life changes.

An irrevocable trust may be considered if you are focused on:

• Long-term asset protection.
• Planning for future healthcare or long-term care costs.
• Reducing estate tax exposure.

In many cases, estate plans use a combination of both types of trusts to achieve different objectives.

Why Legal Guidance Matters

Trusts must comply with Kentucky law and be carefully drafted to achieve their intended purpose. Poorly structured trusts can lead to unintended tax consequences, loss of benefits, or disputes among beneficiaries.

Because irrevocable trusts are difficult to change, understanding the long-term impact before creating one is especially important.

How Hoffman Walker & Knauf Can Help

At Hoffman Walker & Knauf, we work with individuals and families across Kentucky to develop estate plans tailored to their unique needs. Our attorneys take the time to explain options clearly and help clients make informed decisions about trusts and asset protection.

If you are considering a revocable or irrevocable trust, contact Hoffman Walker & Knauf to discuss your goals and explore which approach may be right for you.