What is the difference between a revocable and an irrevocable trust?

The key difference between a revocable trust and an irrevocable trust is whether or not the person who created the trust (often called the settlor) can revoke the trust. 

Most people make simple trusts known as "revocable living trusts," which work like a will to leave property to beneficiaries. Like a will, a revocable trust can be changed or revoked if the settlor changes his or her mind. Only when the settlor dies do the terms of the trust become unchangeable.

In contrast, with an irrevocable trust, the settlor relinquishes all control of the trust assets. Once an irrevocable trust is made, the creator of the trust maintains no control, has no power to revoke, and has no claim of ownership in the trust property.

Irrevocable trusts are usually created to obtain some kind of tax benefit. For example, someone wealthy enough to be concerned about federal estate tax might transfer ownership of a life insurance policy to an irrevocable trust. That way, the proceeds of the policy won't be considered assets of the settlor's estate, and won't be taxed at his or her death.