For this blog, we will focus on two types of trusts: revocable and irrevocable.
Revocable Trust
When you set up a revocable living trust, you generally retain control over the assets in the trust, and just as the name implies, it’s revocable. Changed your mind about who to leave your money to? You can change the beneficiaries. As the grantor of your trust, you transfer the assets into the trust and decide who will benefit from it upon your passing. You can freely transfer assets into and out of the trust, and change the trust’s instructions while you are living and have mental capacity. A revocable living trust generally does not need its own EIN (i.e., tax ID); therefore, any income the asset creates while titled to the trust simply reports to your social security # and follows your marginal tax rates for that year.
Irrevocable Trust
Once you pass away, the trust changes its status from revocable to irrevocable, and an EIN must be obtained for the trust to file taxes as an irrevocable trust. For tax purposes, irrevocable trusts are different. An irrevocable trust can significantly compress tax rates. For 2026, the highest tax bracket of 37% is reached at just $16,000 of income. Compare this to a single filer, whose 37% bracket begins at $640,600, and for married couples who file jointly, the 37% bracket starts at $768,700. If you are dealing with an irrevocable trust, you need a good understanding of how taxes work, given these compressed rates.
For most families doing estate planning, when we discuss the benefits of avoiding probate, controlling asset distribution after death, privacy (probate is a public process – you can look up the distribution of Prince’s estate because it passed through probate), we are most likely talking about a revocable living trust, not an irrevocable trust.
Any opinions are those of Vocare Wealth Advisors and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice. Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional. Investing involves risk and you may incur a profit or loss regardless of strategy selected, including diversification and asset allocation. Prior to making an investment decision, please consult with your financial advisor about your individual situation.
