Estate Planning Advanced
Irrevocable Trust: Benefits
Ideal for Medicaid Planning, and health care purposes: when the trust is funded and the look back period satisfied, the asset cannot be attached by third parties.
Protects Assets
An irrevocable trust removes assets from your estate, shielding them from creditors, lawsuits, and certain taxes.
Fixed Terms
Once created, the trust generally can't be changed or revoked, this offers long-term stability and potential estate planning advantages.
Strong Protection from Creditors due to spend thrift provisions
Avoids Probate
Upon death, assets in the trust pass directly to beneficiaries—bypassing probate and maintaining privacy.
Streamline distribution of assets
Revocable Trust: Benefits
A revocable trust allows you to manage and modify your assets during your lifetime, with the ability to amend or revoke the trust at any time.
Avoids Probate
Upon death, assets in the trust pass directly to beneficiaries—bypassing probate and maintaining privacy.
Maintain Control
A revocable trust lets you retain full control over your assets during your lifetime, with the freedom to update or cancel it as your needs change.
Streamlined Inheritance
Helps your heirs avoid Surrogate court, allowing for faster, more private distribution of assets after your death.
Continuity of Management
In the event of illness or incapacity, your chosen trustee can step in to manage trust assets without court intervention.
QPRT (Qualified Personal Residence Trust)
A QPRT is a type of irrevocable trust that lets you transfer your primary residence or vacation home to beneficiaries at a reduced gift tax cost. You retain the right to live in the home for a fixed number of years, after which ownership passes to your heirs.
Tax Advantage
The value of the gift is discounted based on your retained interest, reducing potential gift and estate taxes. Future appreciation on the property is excluded from your taxable estate, maximizing long-term savings.
Continued Use
You can continue to live in the residence rent-free for the trust term. After the term ends, you may need to pay fair market rent to remain in the home—further reducing your taxable estate.
Medicaid Trust (Medicaid Asset Protection Trust – MAPT)**
A Medicaid Trust is a specialized irrevocable trust that helps individuals qualify for Medicaid without spending down their assets. It’s typically used to transfer ownership of a home or savings out of an individual’s name while allowing them to retain certain rights, like living in the property or receiving income.
Asset Protection
Assets placed in a Medicaid Trust are no longer counted toward Medicaid eligibility, which means you can preserve your home and other wealth from being depleted to cover nursing home costs. Additionally, these assets are often protected from Medicaid estate recovery efforts after death, ensuring they pass to your beneficiaries rather than the state.
Look-Back Period: timing is crucial
Medicaid imposes a five-year look-back period on asset transferred into a trust, meaning planning must be done well in advance of needing care. If you apply for Medicaid within five years of funding the trust, you may face a penalty period of ineligibility.
Retained Benefits
Even though the assets are no longer in your name, you can often continue to live in your home and receive income generated by the trust during your lifetime. A carefully drafted trust balances asset protection with practical access and use.