Before discussing irrevocable trust Long Island, let us first understand what a trust is.
What is a trust?
A trust is a legal entity or agreement between the creator (known as the grantor, settlor, or trustor) and another individual – the trustee – for the trustee to hold the trustor’s assets on behalf of a beneficiary or beneficiaries.
The trust itself is a legal entity, formalized or executed in a trust document.
For assets to be held in a trust, the asset must be re-titled in the name of the trust. Hence, the trust becomes the owner of those assets re-titled thereof.
Typically, all trust assets pass to the beneficiaries outside probate.
Now, there are two types of trust: Revocable living trust and irrevocable trust.
Revocable living trust
The revocable trust, or revocable living trust or simply living trust, is one that can be terminated or altered at any time by the trustor. He can choose to take away assets from the trust into his ownership once again.
The trustor can also name himself as the trustee of his revocable trust and use the assets to his own benefits until incapacity or death, when his named successor trustee then takes authority.
Therefore, assets in a revocable trust are not fully out of the trustor’s ownership and would be regarded as part of his estate for tax and debt purposes.
If your goal is only to avoid probate and it’s cost and delays, then a revocable trust is the right instrument for you.
But there are other benefits provided by irrevocable trust Long Island you won’t get from a revocable trust.
Irrevocable trust Long Island
An irrevocable trust is one that cannot be altered or terminated at any time by the trustor. After retitling assets into the irrevocable trust, he cannot use those assets, take them out, or terminate the trust all by himself. The assets go out of his reach and become the property of the trust. Hence, irrevocable trusts are perfect for asset protection.
Why you need irrevocable trust for asset protection in Long Island
Your creditors can file a claim against your property, to collect your assets as payment for your outstanding debts. But when your assets are in an irrevocable trust, they cannot be touched since they are no longer yours.
As an elderly person, you may also be concerned about long term care costs in a nursing home. If your goal is to avoid using your assets to foot the costs, then you can fund your assets in an irrevocable trust to make them unavailable.
Assets kept in an irrevocable trust Long Island are also not considered available resources for Medicaid eligibility. Hence, even though you have millions but all kept in an irrevocable trust, you would qualify for Medicaid.
Notably, you can gift assets to your loved ones during your lifetime using an irrevocable trust.
However, there is something to note about the Long Island irrevocable trust. An irrevocable trust in Long Island is not entirely irrevocable. It can indeed be revoked if all parties involved in the trust are in consent. That involves the trustor, successor trustee and all beneficiaries. The only thing is that the trustor, on his own, cannot revoke the trust.
There are also different types of irrevocable trust, each with its distinct purpose.
- Irrevocable special needs trust: If your goal is to provide for your disabled loved one without tax or legal delays, then an irrevocable special needs trust is the right instrument for you.
- Irrevocable Life Insurance Trust: If you have insurance assets that you don’t want to pass directly to the beneficiary, and you also don’t want the insurance proceeds to be part of your taxable estate, then you could execute an irrevocable life insurance trust.
- Irrevocable Medicaid Asset Protection Trust: This is arguably the irrevocable trust most often employed by senior citizens in Long Island. This trust is created so that when it comes to paying nursing home and long term care costs, the trust assets are not counted as available resources. It therefore offers eligibility for Medicaid benefits.
But note that there is a “look back period” of 5 years after the creation of the irrevocable Medicaid Asset Protection Trust. During this period, the creator and their spouse will be disqualified from Medicaid. After the 5 years has elapsed, then the assets are no longer available resources for Medicaid eligibility.
In light of this, this trust is best created at least 5 years before you reach the age of Medicaid eligibility which is 65 years.
In an Irrevocable Medicaid Asset Protection Trust, neither the trust creator nor their spouse can be the trustee of said trust.
Contact an estate planning attorney Long Island
The kind of Long Island irrevocable trust you need will depend on your goals. Since they are all complex estate planning instruments, get assistance from an estate planning lawyer near you Long Island.