Irrevocable or Revocable: Which Trust Is Right For You?

All trusts are not created equally; there are many different types used for a variety of purposes. Two common types of trusts in estate and asset protection planning are revocable and irrevocable trusts.

A revocable trust is a trust where you, the trust creator, reserve the right to revoke or change the trust at any time. If properly structured and funded, a revocable trust can be helpful in avoiding probate and allowing for easier management of assets during incapacity. Beware, however, that a revocable trust offers no asset protection. For Medicaid purposes, all of the assets in a revocable trust are considered available and may have to be spent down on the costs of care.

The better option for most older adults is an irrevocable trust. This type of trust cannot
be revoked or changed by you alone, but can be with the consent of the trust beneficiaries. The benefit of making a trust irrevocable is that it can be structured as a Medicaid asset protection trust.

An irrevocable trust set up for asset protection purposes can hold almost any type of asset, including your home, bank accounts, and investments. You cannot have access to the principal of the trust, but you can retain the right to receive the income (dividends and interest). After five years have passed, the assets held in the trust are protected with respect to Medicaid. You would not have to spend down those assets on the cost of care, and instead they are protected and will be inherited by your beneficiaries.

By properly planning ahead, your assets can be maintained for quality-of-life items and ultimately left to your heirs. But creating the trust is only the first step. The trust also has to be funded, meaning assets must be transferred or re-titled into the name of the trust.

For many families in the metro NY area, their most valuable asset is their home. As such, we often transfer title to the home to the irrevocable asset protection trust in order to protect its value. You can still sell your home, purchase a new property, keep your real estate tax exemptions, and no one can sell your house without your consent. Other assets can be placed in a trust for asset protection purposes as well, such as investment accounts, bank accounts, mutual funds, and life insurance.

With the escalating cost of healthcare, it is more important than ever for older adults to
protect the assets they worked their whole lives to save from a sudden healthcare crisis. An irrevocable trust is an important tool in that asset protection plan. Contact the experienced attorneys at Cona Elder Law to discuss your asset protection plan.

Jennifer B. Cona, Esq. is the Founder and Managing Partner of Cona Elder Law PLLC. Cona Elder Law is an award-winning law firm concentrating in the areas of elder law, estate planning, estate administration and litigation, and health care law. The firm has been ranked the #1 Elder Law Firm by Long Island Business News for eight consecutive years. For additional information, visit conaelderlaw.com.