An irrevocable trust is a trust that cannot be modified or terminated by the grantor, according to WebFinance. There are two types of irrevocable trusts: the living irrevocable trust and the testamentary trust.
A grantor creates a living irrevocable trust by transferring assets into the trust during his lifetime, according to Nolo. Living irrevocable trusts provide immediate tax benefits to the grantor and future tax benefits to his estate by removing the assets from the grantor's control and giving ownership of the assets to the trust, says About.com. Therefore, the grantor is not taxed on the income or interest from these assets and the assets are not considered as part of the estate for estate tax purposes. A living irrevocable trust also protects the assets from the grantor's creditors, unless the trust was established to defraud the grantor's creditors. The assets is also not considered when determining Medicaid eligibility.
A testamentary trust is an irrevocable trust that is created by the terms of the grantor's will, according to Finweb. Like a living irrevocable trust, a testamentary trust provides taxation advantages and protects the assets from the beneficiaries' creditors.
The disadvantage of an irrevocable trust is that the grantor cannot modify or revoke it except in certain circumstances, notes About.com. State law and the terms of the trust control when an irrevocable trust may be modified or revoked. Generally, the grantor never has the power to modify or terminate the trust, as such he cannot be the trustee.