New York allows people to establish trusts, which can help control, manage or protect assets. While there are many different types, two of the main types are revocable and irrevocable trusts.
The revocable trust has language saying that the grantor/creator may change or revoke it. The irrevocable trust does not, although based on how the trust is drafted there is still some level of control available.
Irrevocable trusts for Medicaid planning
One of the main issues for people when planning long-term care is gaining access to their state’s Medicaid program. There are various asset-protection strategies, but one that people can use is to establish an irrevocable trust, also known as a Medicaid asset protection trust.
The potential benefit of doing an irrevocable trust is that Medicaid will no longer consider the assets owned by the trust as resources for the purposes of determining Medicaid financial eligibility.
Examples of irrevocable trusts
A standard irrevocable trust would have various terms that direct who may use the assets and how. Here are some examples:
- The grantor may live rent-free in residential real property that the trust holds
- The trustees use the income for the grantor’s benefit
- Trustees may use discretion when distributing to beneficiaries who are minors
- The trustees may not use the principal for the benefit of the grantor
These terms, combined with the way that Medicaid determines resources, make irrevocable trusts an attractive option for some people. There is, however, often some loss of control over and direct access to the assets by the grantor/creator. The decision to go ahead with this type of trust often only comes after considering the entire estate plan.