A living trust is a common addition to the average estate plan. If you are contemplating the creation of a living trust, you will need to decide if your trust will be a revocable living trust or an irrevocable living trust. You may be wondering why you would want to make your trust irrevocable. The Hauppauge living trust attorneys at the Law Offices of Kobrick & Moccia discuss the benefits of creating an irrevocable living trust.
When Is An Irrevocable Living Trust Necessary?
It is perfectly understandable why you might question the reasoning behind creating an irrevocable trust, since it is difficult to modify. Sometimes, however, an irrevocable living trust is necessary to achieve an important estate planning goal, such as:
- Medicaid Planning — Almost half of all seniors in nursing homes across the country depend on Medicaid to help defray the high cost of that care. Qualifying for Medicaid, however, can be problematic for a senior because eligibility is based, in part, on an applicant’s income and assets. If your non-exempt assets exceed the limit at the time you apply for Medicaid, you will be forced to “spend-down” those assets, which essentially means sell the assets to help cover your nursing home costs. One way to avoid that outcome is to establish a Medicaid trust as part of a Medicaid planning component in your estate plan. A Medicaid trust is an irrevocable living trust that protects your non-exempt assets and allows you to qualify for Medicaid when you need it. The Medicaid program will only recognize the trust as a legitimate Medicaid trust if it is irrevocable.
- Asset Protection — Asset protection should be a consideration in every estate plan because there are likely more potential threats to your assets than you realize. Divorce, economic downturns, creditors, and even spendthrift beneficiaries can all create a threat to your hard-earned assets. By transferring assets into an irrevocable living trust, you remove those assets from your estate, thereby placing them out of the reach of the numerous threats that could be lurking around the corner. The concept is simple. If you no longer have any legal ownership interest in the assets because they are now owned by the trust, they cannot be lost to divorce, creditors or any of the numerous other potential threats.
- Special Needs Planning — If you are the parent of a child with special needs, you already know some of the challenges faced when raising a child with special needs. You also probably already have some idea of the costs involved and the time needed. Consequently, for the parents of a child with special needs, estate planning takes on a heightened importance. While your child is a minor, obtaining assistance from state and federal programs such as Medicaid and Supplemental Security Income is crucial. Depending on the type and severity of your child’s disability, your child may continue to need that assistance as an adult. Unfortunately, the law considers your child a legal adult when he/she turns 18 which means eligibility for state and federal assistance programs will be based, in part, on your child’s income and assets. Though the income limits won’t be a problem, the asset limit could be if you, or another well-meaning relative, gift assets directly to your child in an estate plan or at any other time. Your child could lose his/her eligibility for much needed assistance. The good news is that a Special Needs Trust can help. A special needs trust is an irrevocable living trust that supplements the care and assistance that an individual receives from other sources. The trust must be irrevocable, however, for the state/federal government will recognize it as a special needs trust but if it is drafted properly, the assets held in the trust will not jeopardize the beneficiaries eligibility for assistance.
Contact Hauppauge Living Trust Attorneys
Please feel free to download our FREE estate planning worksheet. If you have additional questions or concerns about irrevocable living trusts, contact the Hauppauge living trust attorneys at the Law Offices of Kobrick & Moccia by calling 800-295-1917 to schedule your appointment.