Last updated: May 22, 2026 | By Inna Fershteyn, Esq. | Reading time: ~10 minutes
A revocable trust can be changed or undone by the grantor at any time during his lifetime; an irrevocable trust generally cannot. That single distinction drives every other difference: a revocable trust keeps the grantor in control but gives no protection from creditors, Medicaid recovery, or New York’s estate tax cliff at $7.35 million. An irrevocable trust gives up control but removes assets from the taxable estate, shields them from creditors, and can preserve Medicaid eligibility after the 60-month lookback. This article walks through the benefits and limitations of each, the 2026 probate costs that a properly funded trust avoids, and the New York and federal tax rules that families need to plan around.
Key facts at a glance (2026)
- Revocable trust: changeable any time the grantor is competent; assets remain in the taxable estate; no creditor or Medicaid protection.
- Irrevocable trust: generally fixed once funded; assets removed from the taxable estate; protected from creditors and Medicaid recovery if funded outside the lookback.
- Probate avoided by both: assets held in a properly funded trust pass outside probate, saving 12–24 months and substantial fees.
- New York estate tax exemption 2026: $7,350,000 per individual, with a 5% “cliff” at $7,717,500, above which the exemption is lost entirely.
- Federal estate tax exemption 2026: $15,000,000 per individual under the One Big Beautiful Bill Act.
- New York does not allow portability of the state exemption between spouses; both spouses’ exemptions must be preserved separately.
What Is a Revocable Trust?
A revocable trust, also known as a living trust, is a trust the grantor can change, amend, or revoke at any time while he is competent. The grantor typically serves as the initial trustee, retaining full control of the assets during his lifetime, and names a successor trustee to take over at incapacity or death. After the grantor’s death, the trust becomes irrevocable, and the successor trustee distributes the assets to the named beneficiaries.
Benefits of a Revocable Trust
The core advantage is flexibility. The grantor can add or remove beneficiaries, change distributions, transfer assets in and out, and dissolve the trust entirely. Because the grantor keeps control, the trust adapts to changing family dynamics, financial circumstances, and tax laws.
The second major advantage is probate avoidance. In New York, probate typically takes 12 to 24 months and involves three layers of cost: surrogate’s court filing fees, executor commissions, and attorney fees. Assets held in a properly funded revocable trust pass directly to beneficiaries through the trustee without going through surrogate’s court.
2026 New York Surrogate’s Court Filing Fees (SCPA § 2402)
| Gross value of the estate | Filing fee |
|---|---|
| Less than $10,000 | $45 |
| $10,000 – under $20,000 | $75 |
| $20,000 – under $50,000 | $215 |
| $50,000 – under $100,000 | $280 |
| $100,000 – under $250,000 | $420 |
| $250,000 – under $500,000 | $625 |
| $500,000 and over | $1,250 (additional incremental fees may apply above $500,000) |
Source: New York Surrogate’s Court Procedure Act § 2402, Variable Fee Schedule, subdivision 7.
2026 New York Executor Commissions (SCPA § 2307)
Executor commissions are paid out of the estate to compensate the executor for administering it. Even a moderate-sized New York estate can produce a five-figure commission.
| Portion of estate | Commission rate |
|---|---|
| First $100,000 | 5% |
| Next $200,000 (up to $300,000) | 4% |
| Next $700,000 (up to $1,000,000) | 3% |
| Next $4,000,000 (up to $5,000,000) | 2.5% |
| Anything above $5,000,000 | 2% |
Source: New York Surrogate’s Court Procedure Act § 2307.
Worked example: a $1,000,000 Brooklyn estate
If an executor administers a $1,000,000 Brooklyn estate through probate, the SCPA § 2307 commission is $34,000: $5,000 (5% of the first $100,000) + $8,000 (4% of the next $200,000) + $21,000 (3% of the next $700,000). Add the $1,250 filing fee and attorney fees that typically run 2–5% of the estate, and total probate costs can easily reach $60,000–$80,000. The same $1,000,000 held in a properly funded revocable trust passes outside probate, eliminating the filing fee and the executor commission entirely.
Limitations of a Revocable Trust
The price of flexibility is that the grantor is still treated as the owner of the trust assets for both tax and creditor purposes. Three consequences follow:
- The assets remain in the taxable estate. For grantors with a net worth approaching the New York exemption of $7.35 million, this is the central issue (see the estate tax section below).
- No creditor protection. Under New York’s Estates, Powers and Trusts Law (EPTL) § 10-10.6, “where a creator reserves an unqualified power of revocation, he remains the absolute owner of the property disposed of so far as the rights of his creditors or purchasers are concerned.” Creditors can reach revocable trust assets while the grantor is alive, and creditors of the estate can reach them after death.
- No protection from Medicaid estate recovery. If the grantor receives Medicaid-funded long-term care, the state can recover from the revocable trust after death through the Medicaid Estate Recovery Program, the same way it would recover from any other estate asset.
What Is an Irrevocable Trust?
An irrevocable trust transfers ownership of selected assets from the grantor to a trust managed by a trustee, under terms that generally cannot be changed after the trust is funded. The grantor gives up the right to revoke the trust, change beneficiaries, or unilaterally remove assets. In return, the trust offers tax, creditor, and Medicaid advantages that a revocable trust cannot.
Benefits of an Irrevocable Trust
- Removed from the taxable estate. Once funded, the assets are owned by the trust, not the grantor. They are excluded from the gross estate for New York and federal estate tax purposes (assuming the trust is properly drafted as a completed gift).
- Creditor protection. Because the assets no longer belong to the grantor, creditors of the grantor generally cannot reach them. The same protection extends against future divorce proceedings of beneficiaries when the trust is properly structured.
- Medicaid eligibility. Assets in a properly drafted irrevocable trust do not count toward the applicant’s asset limit for Nursing Home Medicaid in New York. The transfer into the trust must occur outside the 60-month lookback window to avoid triggering a penalty period (see the firm’s 2026 guide to the Medicaid 5-year lookback in New York).
- Probate avoidance. Like a revocable trust, an irrevocable trust passes outside probate, saving filing fees, executor commissions, and 12–24 months of administration time.
The most common irrevocable trust used for long-term care planning is the Medicaid Asset Protection Trust (MAPT).
Limitations of an Irrevocable Trust
- Loss of control. The grantor cannot unilaterally change beneficiaries, take assets back, or revoke the trust. A trustee, not the grantor, manages the assets under the trust’s terms.
- Gift tax considerations. Funding an irrevocable trust may be treated as a taxable gift. In 2026, the federal lifetime gift tax exemption is unified with the $15 million estate tax exemption, so most transfers are sheltered, but the gift still typically requires a Form 709 filing.
- Separate tax filings. An irrevocable trust is usually a separate taxpayer that files its own Form 1041 each year, which adds accounting cost.
- Reduced flexibility. Family circumstances change. The grantor cannot easily respond to a beneficiary’s divorce, addiction, or financial difficulty by adjusting the trust mid-stream.
Side-by-Side Comparison
| Feature | Revocable trust | Irrevocable trust |
|---|---|---|
| Grantor can modify or revoke? | Yes, any time while competent | Generally no; limited modification possible via decanting or court consent |
| Grantor retains control of assets? | Yes, typically as initial trustee | No; managed by independent trustee |
| Assets in taxable estate? | Yes | No (when properly structured) |
| Protection from creditors? | No | Yes |
| Protection from Medicaid recovery? | No | Yes, if funded outside 60-month lookback |
| Avoids probate? | Yes, if properly funded | Yes, if properly funded |
| Separate tax return? | No (grantor’s 1040) | Usually yes (Form 1041) |
| Best fit for | Probate avoidance, incapacity planning, families below the NY estate tax threshold | Estate tax reduction, Medicaid planning, creditor protection, high-net-worth families |
2026 New York and Federal Estate Tax Context
For families with significant assets, the choice between revocable and irrevocable matters most at the intersection of estate tax. Two thresholds matter in 2026.
Federal estate tax exemption. Under the One Big Beautiful Bill Act signed in 2025, the federal estate tax exemption was permanently set at $15 million per individual beginning in 2026 (up from $13.99 million in 2025). The 40% federal estate tax applies only to estates above this amount.
New York estate tax exemption. New York’s exemption for decedents dying in 2026 is $7,350,000 per individual, far below the federal threshold. Estates between the New York exemption and 105% of it ($7,717,500) lose the exemption progressively. Estates above 105% of the exemption lose the entire exemption and pay New York estate tax from the first dollar at graduated rates from 3.06% to 16%. This is the “New York estate tax cliff.”
Two practical consequences for New York families:
- You can owe substantial New York estate tax while owing nothing federally. A Brooklyn brownstone, retirement accounts, and life insurance can easily push an estate above $7.35 million with no federal exposure.
- New York does not allow portability between spouses. Federal law lets a surviving spouse use a deceased spouse’s unused exemption. New York does not. Without proper planning (often through a credit shelter trust or disclaimer trust), the first spouse’s $7.35 million exemption is lost.
Sources: New York State Department of Taxation and Finance, Estate Tax; New York Tax Law § 951-a; Internal Revenue Code § 2010 as amended by the One Big Beautiful Bill Act of 2025.
For families in or near the New York cliff range, an irrevocable trust funded during lifetime is one of the most effective ways to bring the taxable estate back below the threshold and preserve both spouses’ exemptions.
Can an Irrevocable Trust Be Changed?
Sometimes, but the process is deliberately difficult. Two New York statutes govern modification.
EPTL § 7-1.9 — revocation with consent. An irrevocable trust may be revoked or modified if (a) the grantor provides written consent and (b) every beneficiary provides written consent. In practice, this is hard. If even one beneficiary refuses, is a minor, or is legally incapacitated, the path under § 7-1.9 is closed.
EPTL § 10-6.6 — decanting. “Decanting” is a process by which the trustee of an existing irrevocable trust pours the trust’s assets into a new irrevocable trust with revised terms. New York’s decanting statute allows a trustee with discretionary distribution authority to do this without grantor or beneficiary consent in many cases, though the new trust must comply with strict statutory requirements. Decanting can be useful for cleaning up outdated trust language, correcting administrative provisions, or adapting to changes in tax law, but it is not a substitute for getting the trust right the first time.
Because modification is costly and slow, an irrevocable trust should be drafted with the long term in mind. The grantor should consider the trust’s terms as fixed and only modify them when modification is genuinely necessary.
Five Common Mistakes When Setting Up a Trust in New York
- Creating the trust but never funding it. A trust only controls the assets that have been retitled into its name. A revocable trust that owns nothing protects nothing. Real estate deeds, bank accounts, brokerage accounts, and business interests must each be retitled into the trust’s name.
- Assuming a revocable trust protects from creditors or Medicaid. It does not. EPTL § 10-10.6 treats the grantor as the owner. Only an irrevocable trust funded outside the Medicaid lookback offers that protection.
- Funding an irrevocable trust inside the 60-month Medicaid lookback. Transfers inside the lookback trigger penalty periods. Crisis planning is possible but limits the available tools.
- Forgetting about the New York estate tax cliff. Families focus on the $15 million federal number and miss the $7.35 million state threshold. Estates between $7.35 million and $7.72 million lose the exemption progressively, and estates above $7.72 million lose it entirely.
- Not coordinating the trust with the will, beneficiary designations, and powers of attorney. Retirement accounts, life insurance, and TOD/POD accounts pass by beneficiary designation regardless of what the trust says. A trust plan that ignores beneficiary designations leaves significant assets outside the plan.
Frequently Asked Questions
What assets can be put into a trust?
Most assets can be funded into a trust, including bank accounts, brokerage accounts, stocks, bonds, life insurance, personal property, business interests, and real estate. Retirement accounts (401(k), traditional IRA, Roth IRA) and health savings accounts generally should not be retitled into a trust because doing so triggers income tax acceleration; these accounts pass instead by beneficiary designation, and the trust can be named as primary or contingent beneficiary if appropriate.
Can I put cryptocurrency in a trust?
Yes. Cryptocurrency can be funded into a trust, but careful drafting is needed because of how private keys are held, how exchanges treat trust-owned accounts, and how digital asset regulations continue to evolve. The trust language should specifically address digital assets, and the trustee should have access to credentials through a secure mechanism.
What is the difference between a trust and a will?
A will is a document that takes effect at death and directs distribution of probate assets through surrogate’s court. A trust is a legal arrangement that takes effect when signed and funded, and a properly funded trust passes assets to beneficiaries outside of probate. A will can also name guardians for minor children, which a trust cannot. Many families use both: a trust to hold and distribute assets, and a “pour-over” will as a backstop to catch anything not retitled into the trust.
Can I have both a will and a trust?
Yes, and most well-designed New York estate plans include both. The trust holds the major assets and avoids probate. The pour-over will catches any assets that were not retitled into the trust during lifetime and directs them into the trust at death. The will is also where the grantor names guardians for minor children.
Does a revocable trust reduce New York estate tax?
No. Because the grantor retains control, the assets in a revocable trust remain in the taxable estate for both federal and New York estate tax purposes. A revocable trust avoids probate but does not by itself reduce estate tax. Reducing the taxable estate generally requires gifting, an irrevocable trust, or a combination of both, often coordinated with a credit shelter or disclaimer trust to preserve both spouses’ New York exemptions.
Talk to a New York Trust and Estate Planning Attorney
The right trust depends on the family, not the template.
The Law Office of Inna Fershteyn and Associates, P.C. has been guiding families through revocable and irrevocable trust planning, estate tax strategy, and Medicaid asset protection since 1998. The firm serves clients across Brooklyn, Manhattan, Queens, Long Island, Westchester, and New Jersey, and works with English-speaking, Russian-speaking, and Ukrainian-speaking families.
Call: (718) 333-2395 • Office: 1517 Voorhies Avenue, 4th Floor, Brooklyn, NY 11235
Inna is fluent in English, Russian, and Ukrainian — Наша команда говорит по-русски и по-украински.