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Choosing between a revocable and an irrevocable trust is one of the most consequential decisions Indiana families make when building an estate plan. Both types of trusts can keep assets out of the probate process, but they differ sharply when it comes to control, flexibility, creditor protection, taxes, and long-term care planning. Understanding the difference between a revocable and irrevocable trust is the first step toward selecting the right structure.
At Mattox & Wilson, L.L.P., our New Albany estate planning attorneys guide individuals and families throughout Floyd County, Clark County, Harrison County, and the rest of Southern Indiana through this decision. Attorney Stephen T. Naville concentrates his practice on estate planning, trust preparation and administration, probate administration, elder law, and Medicaid planning, and he regularly helps clients weigh these two options.
Individuals considering a trust are encouraged to call our office at 812.944.8005 to schedule a consultation.
The difference between a revocable and an irrevocable trust comes down to control. A revocable trust can be amended or canceled by the person who created it, known as the settlor or grantor, at any time during life. An irrevocable trust generally cannot be changed or undone after it is created, except in limited circumstances that may require beneficiary consent or court involvement.
Indiana law sets a default rule that makes precise drafting essential. Under Indiana Code section 30-4-3-1.5, a trust created under an instrument executed after June 30, 2005 remains revocable unless the trust document expressly states that it is irrevocable. In other words, a trust in Indiana is revocable by default, and irrevocability must be spelled out in the document itself.
That single distinction drives everything else: how much flexibility the settlor keeps, whether the assets are protected from creditors, how the trust is treated for tax purposes, and whether the trust can play a role in qualifying for Medicaid.
A revocable living trust is created during the settlor’s lifetime and can be modified, restated, or revoked entirely for as long as the settlor has legal capacity. In most revocable trusts, the settlor also serves as the initial trustee, which means daily life changes very little. The settlor continues to buy, sell, spend, and manage trust assets exactly as before.
The primary benefits of a revocable trust are probate avoidance and incapacity planning. Assets titled in the trust pass to beneficiaries under the terms of the trust document rather than through the probate court. If the settlor becomes incapacitated, a named successor trustee can step in and manage trust assets without a court-supervised guardianship.
The tradeoff is that a revocable trust offers no asset protection. Because the settlor keeps full control, trust assets remain reachable by the settlor’s creditors, remain countable for Medicaid eligibility purposes, and remain part of the settlor’s taxable estate at death. Indiana law also limits who else can undo the arrangement: under Indiana Code section 30-4-3-1.5(g), an agent acting under a power of attorney may revoke or amend a settlor’s revocable trust only to the extent expressly authorized by the trust or the power of attorney.
An irrevocable trust requires the settlor to give up ownership and control of the assets placed in it. A trustee, often someone other than the settlor, manages the trust property for the benefit of the named beneficiaries according to the terms written into the document. Because the settlor no longer owns the assets, properly structured irrevocable trusts can shield property from future creditors, remove assets from the taxable estate, and support long-term care planning.
That protection carries real restrictions. Once assets are transferred, the settlor generally cannot take them back, and distributions are governed by the trust terms rather than the settlor’s wishes in the moment. We covered these limits in detail in our earlier article on taking money out of an irrevocable trust in Indiana, which explains when withdrawals are and are not possible.
Common irrevocable trusts used by Indiana families include Medicaid asset protection trusts, irrevocable life insurance trusts, and special needs trusts created to preserve a disabled beneficiary’s eligibility for government benefits.
Yes. Assets properly titled in the name of a revocable trust before death are non-probate assets, so they pass directly to beneficiaries without court administration. Probate avoidance saves time, keeps the family’s financial affairs private, and reduces administration costs. Assets left outside the trust may still require probate administration, which is why funding the trust correctly matters as much as signing it.
Probate avoidance is not always the deciding factor for smaller estates. Under Indiana Code section 29-1-8-1, estates valued at $100,000 or less may be settled with a small estate affidavit rather than formal probate for individuals who die after June 30, 2022. Families whose probate assets fall under that threshold may find that a well-drafted last will and testament combined with beneficiary designations meets their needs, while larger or more complex estates often benefit from a trust.
State death taxes are not a concern for Hoosier families. Indiana repealed its inheritance tax for deaths occurring after December 31, 2012, and the state does not impose an estate tax, according to the Indiana Department of Revenue. Trust planning in Indiana therefore focuses on federal law.
The federal estate tax exemption is $15 million per person beginning January 1, 2026 under the One Big Beautiful Bill Act, with amounts above the exemption taxed at a top rate of 40 percent. A revocable trust provides no estate tax savings because the assets remain in the settlor’s taxable estate. Certain irrevocable trusts, by contrast, can remove assets and their future appreciation from the taxable estate, which matters for families whose wealth approaches the federal threshold.
Long-term care costs are the most common reason Southern Indiana families ask about irrevocable trusts. Indiana applies a 60-month look-back period to transfers made before applying for nursing home Medicaid, meaning gifts and transfers for less than fair market value made within five years of the application can trigger a penalty period of ineligibility.
Because a revocable trust remains fully countable, it provides no Medicaid protection at all. A properly drafted irrevocable trust, funded more than five years before a Medicaid application, may allow a family to preserve a home or savings while still qualifying for benefits. Timing is everything, which is why we encourage families to begin Indiana Medicaid planning well before a health crisis arrives.
The right choice depends on what the family is trying to accomplish. A revocable trust tends to fit when the primary goals are avoiding probate, planning for incapacity, keeping the estate plan private, and retaining full control of assets during life. An irrevocable trust tends to fit when the goals include protecting assets from creditors or nursing home costs, reducing federal estate tax exposure, or providing for a beneficiary with special needs.
Many complete estate plans use both. A married couple might hold everyday assets in a revocable living trust for probate avoidance while placing the family home or a life insurance policy in an irrevocable trust for protection. Every plan should also include a pour-over will, financial and health care powers of attorney, and updated beneficiary designations so that no asset falls through the cracks.
Our New Albany trust lawyers draft, fund, and administer both revocable and irrevocable trusts for clients across Southern Indiana. Attorney Stephen T. Naville brings nearly two decades of experience in estate planning, trust administration, probate, elder law, and Medicaid planning, and he takes the time to match each trust structure to the family’s actual goals rather than a one-size-fits-all form.
Because Indiana law treats every trust as revocable unless the document expressly says otherwise, and because irrevocable transfers interact with the five-year Medicaid look-back, the details of drafting and timing carry lasting consequences. Getting those details right the first time is far less costly than trying to fix them later.
Individuals and families weighing a revocable or irrevocable trust are encouraged to call Mattox & Wilson at 812.944.8005 to schedule a consultation at our New Albany office. We listen first, explain the options in plain English, and build a plan designed to protect what matters most.