Wednesday, April 10, 2024

How To Set Up An Irrevocable Trust In New York

New York State Irrevocable Trust Attorneys

Pre-planning for Medicaid with an irrevocable trust

Planning for your future, choosing the best formula for doing so and, above all, deciding who will be the person to carry out your will are difficult decisions to make. Naming the right trustee can take some time and it is best to do so with all the information available.;

At Ortiz & Ortiz we have experienced estate planning attorneys who can advise you on all of this and help you find the best way to secure your future and that of your family.;

  • We listen to your case and what your estate planning objectives are.
  • We present you with all the possible alternatives and what each one implies.
  • We guide and advise you in making the best decision.
  • We draw up the trust document, including each of your wishes.

We have offices in Queens and Manhattan, but if you live in another area of New York we can schedule a virtual appointment to review your case as soon as possible. Contact us!;

Medicaid Will Put A Lien Against The House

Now, your primary resident is not an asset subject to the Medicaid spend down.; If your only asset is your house and you have spent down all of your other assets that are not in an IRA or qualified retirement plan, you can qualify for Medicaid immediately.; So why put the house in an irrevocable trust then?; While Medicaid cannot make you sell your primary residence or count it as an asset for the spend down, Medicaid will put a lien against your estate for the amount they pay for your care.; So when you pass away, your house does not go to your children or heirs, Medicaid assumes ownership, and will sell it to recoup the cash that they paid out for your care. Not a great outcome.; Most people would prefer that the value of their house go to their kids instead of Medicaid.

If you transfer the ownership of the house to an Irrevocable Trust, you can live in the house for the rest of your life, and as long as the house has been in the trust for more than 5 years, its not a spend down asset for Medicaid and Medicaid cannot place a lien against your house for the money that they pay out for your care.

So if you are age 65 or older or have parents that are 65 or older, in many cases it makes sense for that individual to setup an irrevocable trust, transfer the ownership of the house to the trust, and start the 5 year clock for the Medicaid look back period. ;;Once you have satisfied the 5 year period, you are free and clear.

Possibly The Biggest Negative Of Irrevocable Trusts

Never forget that you lose control of property transferred to an irrevocable trust.

Has your youngest child ticked you off? Too bad, he is permanently a Beneficiary.

Estate tax exemptions have increased, and your estate is no longer estate taxable? Sorry, you cant reclaim the asset.

Want to receive more trust income, or want your Trustee to sell your current house and upgrade to a larger one? Hope youre on good terms with them: You are not the Trustee, and he or she is the person who gets to decide what happens to trust property.

And worst of all, there are very specific rules you must follow to qualify for the benefits of an irrevocable trust, and if your trust breaches too many of these rules you may end up with an irrevocable trust that locks up your money but does not provide you with any of the advantages of the trust.

Lastly, just because you have an irrevocable trust does not mean you qualify for all three benefits of an irrevocable trust. Quite the opposite: A trust that protects you from estate taxes is usually not Medicaid-compliant, and was most likely not set up with a permissible trustee to allow the creditor protection an asset protection trust affords. So the real question is not whether or not you want an irrevocable trust, but which irrevocable trust would you want now knowing that it may not be the one you want in the future.

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In New York If I Make A Living Trust Do I Still Need A Will

Yes, you’ll still need a will. This might seem confusingisn’t the point of a living trust to avoid needing a will? Yes, it is, and your will might never be used. But you should still write one, for one or both of the following reasons:

  • Designating a guardian for minor children. You cannot use a trust to name a guardian for your minor children. For this reason alone, if you have minor children, you should write a will that names the guardian.
  • Accounting for property that you have not transferred to your trust. It happens all the timepeople create a trust and forget to formally transfer property to the trust . Or, people buy or inherit property after they’ve set up their trust, and forget or don’t know to take ownership as the trustee of their trust. Either way, the property will not be distributed according to the terms of the trust. You should have a will as a backup to dictate how assets that are not in the trust should be distributed.

If you don’t have a will, any property that isn’t transferred by your living trust or other method will go to your closest relatives as determined by New York state law.

How Do I Get Started Setting Up An Irrevocable Trust

Mississippi Irrevocable Trust Agreement

The first step is to contact one of the attorneys in our estate planning department. We will send you;some background information and an initial questionnaire to get you started with the process. We will then;set up a time to meet to discuss your family circumstances, specific estate planning goals, and tax issues.


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Irrevocable Trusts And Taxes

One of the biggest advantages of an irrevocable trust are netting tax benefits for the grantor. Irrevocable trusts reduce the size of the grantorâs taxable estate, which in turn help them to minimize how much taxes are paid. But in order to actually make use of these benefits you’ll probably need to have a very large estate, so an irrevocable trust may only be most helpful for very wealthy individuals.

The Difference Between A Trust And A Will

Ill stop for a second because this is usually where I get the question, So if I have a trust, do I need a will?; The answer is yes, you need both.;; Anything owned by your trust will go immediately to the beneficiaries of the trust but any assets not owned by the trust will pass to your beneficiaries via the will. Trusts can own real estate, checking accounts, life insurance policies, and other assets.; But there are some assets like cars and personal belongings that are usually held outside of a trust that will pass to your beneficiaries via the will.;; But in most cases, people have the same beneficiaries listed in the will and the trust.

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What Is An Irrevocable Trust In New York State In 2021

Planning for the future when you are no longer around or can no longer decide for yourself is undoubtedly a difficult task. Deciding who will be the person who will manage and take care of all your assets after your last wishes, may involve some risks. How to choose that person and under what role? In this article we tell you what is an irrevocable trust in the State of New York. But first, lets start with the basics: What is a trust?;

Irrevocable Trust New York What You Need To Know

What is an Irrevocable Trust? How it Protects Assets

In New York, an irrevocable trust is a trust that cannot be revoked or modified without either a court order or written consent from all parties involved .

Is a New York Trust Revocable or Irrevocable by Default?

A New York trust is irrevocable by default.;;NY EPTL § 7-1.16. However, it is still a good idea to not leave the issue hanging in the air and to instead specify if a trust is revocable or irrevocable.

Even an irrevocable trust is only irrevocable if there is no consent of all the parties involved. It can be revoked with a written consent of all the parties involved, including grantors, trustees and beneficiaries. If some of the parties are not available or are minors, contact a New York estate attorney.

Even a trust that is expressly stated to be revocable becomes irrevocable upon the death of the settlor/grantor, the person who made the trust.

Can You Revoke or Modify a New York Irrevocable Trust?

As life circumstances change, a trust may need to be changed or updated. But what happens if the trust is irrevocable? Does that mean that the trust can never be revoked or changed?

Most irrevocable trusts in New York have a work-around that allows them to be changed or modified, even if they are irrevocable. We would have to look at the language of the trust and other circumstances, but most irrevocable trusts have a way out that allows us to have them revoked.

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Living Trustsrevocable & Irrevocable

The main thing to remember about a living trust is that it goes into effect while you are alive. ;Often, living trusts help you during your life and then gives away the property after your death. The main reason for this is to avoid the probate process, which can be expensive and take a lot of time. Although most people set up living trusts to benefit their families, you can name anyone as a beneficiary, including yourself. For example:

  • You can put an investment account that brings income into a trust and name yourself as beneficiary while you are alive and then, after you die, have the income go to your spouse, children, and/or other relative, friend, or charity, until the trust ends and the assets are distributed.
  • If you have an illness that is likely to disable you, you can establish a living trust and put the title to your assets into the trust for your benefit, naming yourself as trustee and someone to replace you as trustee when and if you become too sick to continue.

In each of these examples, after your death, use of the property or receipt of income from the trust passes to one or more beneficiaries without the need for probate.

When you create a living trust, you must place the asset into the trust once the trust document is signed. ;For instance:

Create A Trust Document

You cannot set up a trust without some legal paperwork that explains how it works. The trust document or trust agreement is the foundation of the trust. It establishes the following:

  • The grantor or the person who opens the trust

  • What property and assets are held by the trust

  • The beneficiaries who receive the trust assets

  • The trustee who manages the trust

  • The successor trustee who takes over when the trustee dies or can no longer fulfill their duties

You can also create a shortened version of your trust document called a certificate of trust to use as proof of the trust’s existence when handling trust matters.

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Irrevocable Trusts Vs Revocable Trusts

Revocable trusts may be amended or canceled at any time as long as their creator is mentally competent. They do offer the benefit of allowing their creator to cancel them and reclaim property held by the trust at any time before death.;However, such trusts do not offer the same protection against legal action or estate taxes as irrevocable trusts.;

When using revocable trusts government entities will consider that any property held in one still belongs to the trust’s creator and therefore may be included in their estate for tax purposes or when qualifying for government;benefits. Once a revocable trust’s creator dies the trust becomes irrevocable.

Wealthy Women Face Challenges In Estate And Tax Planning / White Plains Ny & New York Ny

General Form of Irrevocable Trust Agreement

Given the expectation the Biden administration will roll back some of Trumps favorable policies of the past four years, tax consultants and accountants are already hard at work. But for HNW women, dealing with election fallout is minor, compared to the bigger fish they have been frying in the tax pan for decades.

Election cycles often mean changes to estate and tax planning strategies around estate planning, charitable donations, and capital gains, but thats not the only challenge facing wealthy women now, says a recent article For Wealthy Women, Tax and Estate Planning is Weak Link from Think Advisor. Preparing for big changes, from presidential elections to death or divorce, is all too often a surprise, even for accomplished and financially successful women.

Statistically, women outlive men, so there needs to be a plan for the unexpected. As attitudes shift and more women build their own wealth, they are less likely to stay in unsatisfying marriages. Although the overall rate of divorce in America is declining, the number of gray divorces is increasing.

One essential step in planning for high net worth women is to consider what assets they will need to continue their current lifestyles and what assets would be at risk in case of death or divorce.

Dramatic changes in asset valuation resulting from the pandemic may make this a good time to transfer shares to children and grandchildren, including real estate holdings and closely held family businesses.

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What Is A Living Trust

A living trust is a document establishing a legal framework within which to store a persons assets. A living trust details a grantors wishes for his or her assets and is intended to make the transfer of those assets to beneficiaries easier. Each living trust has a trustee, who is responsible for overseeing the assets in the trust and ensuring the assets are passed along to the trusts beneficiaries according to the trusts instructions.

There are two types of living trusts: irrevocable living trusts and revocable living trusts. Irrevocable living trusts are permanent. Once assets are placed in irrevocable living trusts, they cannot be removed unless each person named in the trust gives his or her express permission. Youll relinquish control of the assets you place into an irrevocable living trust, and thus taxes will apply to the trust itself, not to you.

A revocable living trust, on the other hand, is more flexible. It allows the grantor to remove assets from the trust and modify the terms of the trust. Youll retain control of the assets you place in the trust. Because the assets in the trust remain under your ownership, you will pay taxes accordingly.

How Do Revocable And Irrevocable Trusts Differ

However, if youve established a trust, your own trustee can manage your affairs without a courts interference. You may establish a revocable trust or an irrevocable trust.

With a revocable trust, you transfer assets to the ownership of the trust, you retain control of those assets, and you can amend or dissolve the trust at any time. Assets transfer quickly to your chosen beneficiaries after your death.

Irrevocable trusts help you to give away assets while youre still alive so that those assets arent subject to estate taxes. A New York estate planning lawyer will recommend creating an irrevocable trust if that is whats right for you.

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Irrevocable Trust Medicaid Planning

An Irrevocable Trust can be useful for Medicaid Planning. In short, the grantor can form a trust, transfer assets into the trust and then wait out the Medicaid look-back period. Once past, the grantor can apply for Medicaid while the property remains safely in the Irrevocable Trust, sheltered from childrens divorce and creditors. Using Irrevocable Trusts in Medicaid planning is complex. Only attempt such planning after a thorough Estate Planning Lawyers analysis.

What Does It Mean That The Trust Is Irrevocable

When to Make Distributions From a Trust

There are two options when creating a trust. It can be a New York revocable living trust or irrevocable trust in the state of New York. Choosing one or the other will depend on your long-term objectives. For example, the revocable trust is an agreement that can be modified during life. It should also be noted that the revocable trust is not permitted in all states, although New York is one of the states that allows it.;

When we talk about the irrevocable trust it means that it is an agreement of a permanent nature. That means that the assets that go into the trust are outside the control of anyone other than the trustee. This type of trust is generally used to protect loved ones who are named as beneficiaries in the document.;

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What Is An Irrevocable Trust

An Irrevocable Trust is a trust created by the Grantor making it impossible to revoke the trust and bring the assets back into his name. This permanent status differs from a Revocable Trust, designed specifically for being withdrawn at any time. Once the Grantor gives an asset to the Irrevocable Trust, the asset belongs to the trust. At its most basic level, Asset Protection and Estate Planning with an Irrevocable Trust stems from this fact: if properly drafted a person can give assets to an Irrevocable Trust and his future creditors cannot take that asset. The Grantor no longer owns the asset; the Trust owns the asset.

Protect Assets From A Long

When individuals use an irrevocable trust to protect assets from a long-term care event, its sometimes called a Medicaid Trust.;;; If you have ever had the personal experience of a loved one needing any type of long-term care whether via home health aids, assisted living, or a nursing home, you know how expensive that care costs.; According to the NYS Health Department, the average daily cost of a nursing home is $371 per day in the northeastern region.; Thats $135,360 per year.

For an individual that needs this type of care, they are required to spend down all of their assets until they hit a very low threshold, and then Medicaid starts picking up the tab from there. ;Now the IRS is smart.; ;They are not going to allow you to hit a long term care event and then transfer all of your assets to a family member or a trust to qualify for Medicaid.; There is a 5 year look back period which says any assets that you have gifted away within the last 5 years, whether to an individual or a trust, is back on the table for purposes of the spend down before you qualify for Medicaid.; This is why they call these trusts a Medicaid Trust.

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