Comparing a Revocable Trust with an Irrevocable Trust
This edition of the Koldin Law Center E-Newsletter is part of a series about frequently asked questions comparing legal documents, legal roles, and government benefits.
All prior newsletters are saved on our website. You can read them by clicking here.
We receive many questions from clients and readers of our newsletter asking about the differences between various legal documents, legal roles, and government benefits. In this newsletter we compare the difference between a Revocable Trust and an Irrevocable Trust.
Revocable Trusts and Irrevocable Trusts are Living Trusts
Revocable Trusts and Irrevocable Trusts are Living Trusts. These Trusts are created and typically funded while you are living.
Revocable Trusts and Irrevocable Trusts are created by written agreement between the Grantor (sometimes referred to as Settlor) and one or more Trustees.
Revocable Trusts and Irrevocable Trusts Avoid Probate
Both Revocable Trusts and Irrevocable Trusts avoid Probate for all assets transferred to the Trusts.
On your death, or whenever the Revocable Trust or Irrevocable Trust document says that the Trust terminates, the Trustee will then distribute the Trust assets to the beneficiaries you have designated in the Trust document.
No Court proceeding is needed to authorize the Trustee to distribute to your beneficiaries.
Beneficiary Trusts
Revocable Trusts and Irrevocable Trusts can direct that a beneficiary’s share be held in a Trust.
Some examples of “Beneficiary Trusts” which will be covered in future newsletters in this series are:
■ Trust for minors
■ Discretionary Trust
■ Supplemental Needs Trust
■ Income for Life Trust
■ Dynasty Trust
■ Pet Trust
Will The Trust Protect My Life Savings From Long Term Care Costs?
Revocable Trust: No. Under the Medicaid laws, any assets that you can withdraw from your Trust are not protected. Medicaid will require you to use those assets towards the cost of care in a Nursing Home or for Home Care.
Irrevocable Trust: Yes. The only type of Trust that will truly protect your life savings and your family home in the event of a catastrophic illness is an Irrevocable Medicaid Trust where the language of the Trust Agreement appropriately complies with the federal and state Medicaid requirements.
If your objective is not to protect your life savings with the Trust, but rather it is only to avoid probate or minimize estate taxes, then a Revocable Trust might be more suitable. Long Term Care Insurance should also be considered.
Can I Revoke My Trust?
Revocable Trust: Yes, you can revoke or amend your Trust by yourself.
Irrevocable Trust: Yes, you can revoke or amend your Trust, but not by yourself.
New York law specifically allows an Irrevocable Trust to be revoked or modified by all interested parties.
You do not reserve the right by yourself to revoke your Irrevocable Trust. Since you cannot revoke the Irrevocable Trust by yourself, your Trust is protected from a Medicaid Agency forcing you to revoke your Trust and take back your life savings to use towards the cost of care.
Since you cannot revoke the Irrevocable Trust by yourself, the assets that you transferred to your Trust are protected.
New York law defines interested parties as the Grantors of the Trust and the Beneficiaries of the Trust.
For most of our clients, the interested parties to an Irrevocable Trust are the parents who create the Trust and the children who are the beneficiaries of the Trust.
Depending how the Trust is written, this means that the parents and children together can revoke an Irrevocable Trust.
Can I Serve as Trustee my own Trustee?
Revocable Trust: Yes, the Grantor can name himself/herself as Trustee.
Irrevocable Trust: It is unknown whether a Medicaid Agency would at some point consider this as too much control by the Grantor. A Medicaid Agency might attempt to argue that an Irrevocable Trust should be treated as a Revocable Trust when the Grantor also serves as Trustee. In an abundance of caution, the Koldin Law Center, P.C. does not prepare Irrevocable Trusts which name the Grantor as the Trustee.
For a discussion of Revocable and Irrevocable Trusts, please visit our website by clicking here.
At the Koldin Law Center, P.C., located in East Syracuse, New York, we have over 50 years of experience helping individuals plan for immediate crisis and long term care.
The Koldin Law Center, P.C. limits its practice to the specific field of Elder Law which includes estate planning and Medicaid law.
Our attorneys are available to discuss your estate planning options, including the advantages and disadvantages of Revocable Trusts and Irrevocable Trusts, along with other estate planning considerations including a Will, Power of Attorney, and Health Care Proxy.
When the Koldin Law Center, P.C. handles a Medicaid case, we not only handle the entire application process, but we also review asset protection options with our clients. We review with our clients who are already in a Nursing Home options to protect some or all of their assets beyond merely establishing Medicaid eligibility.
We do not charge a fee for the initial consultation. We welcome your children, family attorney, accountant, and/or financial planner to be present at the initial consultation.
There is something you can do.
Our Attorneys Are Available To Speak To Your Organization
Our Attorneys speak to groups throughout New York State as a public service. If you would like to arrange for one of our Attorneys to speak to your group, please contact our office.
We Appreciate Your Referrals
We have been told by many clients who are in a crisis that they wish they had known about our firm much sooner. We are proud of the many families we have helped in times of crisis.
We are also proud of the many families we helped avoid financial crisis by doing estate planning in advance.
We all share the responsibility for making our family and friends aware of the planning options available to them.
Your referral to the Koldin Law Center could make a major difference in the lives of your family and friends if they are someday faced with a long term illness.
Remember that the Koldin Law Center offers many services for clients of all ages. Our services range from basic estate planning such as a simple will to complex estate planning including asset preservation planning.
THERE IS NO FEE FOR THE INITIAL CONSULTATION
