Various types of Trusts have become popular for estate planning in recent years. Trust Attorney, Alan Ross, is familiar with and experienced in preparing many types of trusts.
A Revocable Trust (also known as a Living Trust) is, perhaps, the trust that is known by most people. Many clients execute a Revocable Trust in order to avoid having their Will probated in Surrogate’s Court. A Revocable Trust can be amended anytime and the Grantor of the Trust (that is the person who makes the trust) is also, in most cases, the Trustee. The reason for this is to allow the Grantor/Trustee the right to retain control over his or her own assets during their lifetime. Clearly, that is a major reason for the popularity of this type of trust. A Revocable Trust is a very useful and important estate planning tool.
A Revocable Trust acts much the same way as does a Last Will and Testament. The Trust document always provides for the distribution of the assets upon the death of the Grantor of the Trust. Since a Trust is its own entity, the assets that are in the Trust do not have to be probated in Probate Court. It should be known, however, that since the Grantor of the Trust retains control over the assets, all of the assets of the Trust become part of the grantor’s total estate for determining possible estate taxes.
Conversely, an Irrevocable Trust cannot, as a general rule, be amended. Once executed and funded, if an Irrevocable Trust is amended, severe income tax consequences could result thereby. In addition, the Grantor of an Irrevocable Trust, must relinquish control over his or her assets in order to comply with IRS regulations. This rule provides (and this is the advantage of an Irrevocable Trust), that the assets that are placed into an Irrevocable Trust will not be included in your estate for the purposes of determining whether your estate is liable for an estate taxes.
Many people execute an Irrevocable Trust in order to possibly qualify for future Medicaid benefits. However, careful attention must be paid in order to determine whether this is a useful tool for estate planning purposes. Once the Grantor makes an Irrevocable Trust and funds it with assets, generally speaking, you cannot take those assets back into your individual name without possible substantial income tax consequences.
In addition, Medicaid has a 5 year look back rule which means that, if your assets exceed a certain amount, and if you placed them into an Irrevocable Trust, you would not qualify for Medicaid until a legal period of time expired which would then allow you to obtain Medicaid benefits. Consultation with a qualified Medicaid attorney is necessary in order to determine whether an Irrevocable Trust is right for you.
A Supplemental Needs Trust is an excellent method to provide for the needs of a disabled child or children or one with special needs. Their money would be placed into a Supplemental Needs Trust and used in a specific and legal way for his or her care, comfort, support and maintenance. Consult with a qualified Supplemental Needs Lawyer to determine whether anyone in your family should have a Supplemental Needs Trust.