• Income generated in an irrevocable trust is not subject to taxes so more money is left to the beneficiariesmoney image by cherie from Fotolia.com
  
  A trust is a document that is created during a person's lifetime that arranges for the management, safekeeping, preservation and distribution of an individual's assets. A trust can be structured to end when an individual dies or it can continue for a period of time after a person's death, depending on their wishes. There are several types of trusts including irrevocable trusts. There are advantages and disadvantages to having an irrevocable trust.
  
  

Irrevocable Trust

• An individual who creates a trust is called the granter. The granter designates a person or financial institution to carry out the wishes in the trust. This person is called the trustee. The people or persons that are designated to receive income or assets from the trust are called the beneficiaries.
  
  An irrevocable trust is a form of a trust that cannot be changed or dissolved once it is created. Once an irrevocable trust is established, you can not remove assets, change beneficiaries or rewrite the terms in the trust.
  
  

Advantages

• There are several important advantages in having an irrevocable trust. The most significant advantage to having an irrevocable trust is for tax liability purposes. Once assets are transferred into an irrevocable trust, the assets and all future appreciation on these assets would not be taxable. Irrevocable trusts can include life insurances and residences and these assets can generate income over the years. No tax would be paid on this income in an irrevocable trust. Therefore, more money is left to the beneficiaries.
  
  If a person becomes incapacitated, the assets in the trust would be managed by the trustee. If the incapacitated person did not have a trust, the financial affairs would be left to the public to decide. This could be costly because the decisions would be decided in guardianship proceedings, which would require a lawyer.
  
  All property that is transferred through an irrevocable trust would avoid probate. If an individual did not have an irrevocable trust, all property that is dispersed in his will would be held up in probate for at least six months. This allows creditors to file a claim against the estate if they are owed money. All property in an irrevocable trust can be dispersed immediately and is not subject to lawsuits or claims against the estate. Avoiding probate is important because all probate hearings become public record. An irrevocable trust is not part of public record and can remain private.
  
  

Disadvantages

• One of the disadvantages to an irrevocable trust is that you relinquish all control over the assets in the trust and you cannot change the terms of the trust. Irrevocable trusts can also be expensive to set up, depending on the complexity of the agreement and the amount of assets in the irrevocable trust. Irrevocable trusts are subject to a gift tax when the assets are transferred into the trust, but this is the only time an irrevocable trust can be taxed.