Schedule a Free Consultation

What Long Island Residents Should Know About Irrevocable Trusts

Posted on August 15, 2022

Facebook
Twitter
LinkedIn

A trust creates a vehicle that will hold certain assets. A trustee will then manage those assets on behalf of the beneficiary or beneficiaries of the trust. In estate planning, trusts are often used to pass assets directly to beneficiaries, thus avoiding the probate process. They’re also a good vehicle for ensuring that irresponsible or disabled beneficiaries will have money to live on even if they are not capable of managing an inheritance themselves. Before you make any decisions, speak with a qualified Long Island estate planning attorney.

A revocable trust is a living trust. This means that you can be the beneficiary of the trust as long as you are alive. The trust may also be modified as long as you are alive. Assets may be moved in and out of the trust.

An irrevocable trust may not be modified once created, except in very limited circumstances. Once assets are placed in an irrevocable trust they remain in the trust, and only the trustee may control them. 

There are two types of irrevocable trust.

The irrevocable living trust is a trust in which the settlor re-titled each asset into the trust while they are still alive. 

When you create an irrevocable testamentary trust you also create the trust while you’re still alive, but it is paired with a Will. The terms of the trust will only be activated once you die. The terms of the trust will be administered according to the terms of your Will. This still allows the trustee to transfer assets or control of assets to beneficiaries as appropriate.

Assets in an irrevocable trust may also be protected from lawsuits, judgments, or government agencies that might otherwise be able to attach to your assets.

Medicaid Asset Trusts are another type of irrevocable trust. These help you pay nursing home or other long-term care expenses in the event that you need such care. It can help you protect and exempt assets should you need to apply for assistance. 

Trusts are not the proper vehicle to meet the goals of all estate planners. As your estate planning lawyers, we will only recommend this type of trust in the event that it is the proper vehicle to meet your needs, goals, and concerns. 

How Does an Irrevocable Trust Alleviate Gift and Estate Tax?

An irrevocable trust can be set up and funded to address estate and gift taxes. The trust assets will remain separate from your taxable estate if you give up all rights to income and principal from the trust. Giving up your rights to the income and principal means that you also need to give up the ability to modify the Trust. 

Trust entities can hold a wide range of assets. These include real estate and financial accounts. The Trust can safeguard these assets against creditors and help alleviate estate tax consequences. Trusts are established by Grantors and then are managed by Trustees who can either be an individual or a company. These entities are responsible for preserving the assets in the best interests of the trust and income beneficiaries. 

The trust terms include gifting and the trustee has significant gifting power for the benefit of the beneficiaries. These benefits include tuition payment, healthcare, maintenance, or welfare. The named beneficiaries may also be able to purchase a real estate property.  These gifting arrangements will be in place so that the Grantor can take advantage of his or her annual gift exemption and lifetime exclusions.

Have you done your estate planning yet? Do you know whether your assets will truly serve your loved ones after you die? 

If you haven’t, contact Schlessel Law. We specialize in elder law and estate planning, and we’re prepared to help.

See also:

What is Medicaid’s Estate Recovery Program?

What Happens if You Die Without a Will on Long Island?

How Often Should You Update Your New York Estate Plan?

Get In Touch
Related Posts

Check out more related posts.