Trusts are legal documents created for the protection of assets, beneficiaries o,r both. For a family that has worked and saved money for decades, Trusts are a wonderful tool to maintain the family’s financial strength. Trusts offer flexibility and continuity
Our first conversation, whether it is in your home or our office, is about priorities. Is there an expectation of long-term medical care with significant costs? Are there assets that require specific planning and estate tax advisement? Does someone own a vacation home outside of New York? Are there family members that don’t see eye to eye? The type of Trust that fits with your priorities depends on these questions.
Revocable Trusts are flexible, but potent instruments which allow a diversity of assets to remain under one document and within the control of the Trust creator. Revocable Trusts may be changed, amended, or revoked by the Trust creator up until their passing. The major benefits of a Revocable Trust include: Probate and Ancillary Probate avoidance (properties owned in other states after you die usually require an ancillary probate unless it is in a Trust or jointly owned), retaining control over Trust Assets over the Trust creator’s lifetime while reaping important tax benefits. Revocable Trusts are not Medicaid Asset Protection Trusts
Amending a Revocable Trust to reflect new realities in an estate plan affords clients peace of mind. Trustees, beneficiaries, and distribution rules are only some of the subjects Trust Amendments tackle. Ensuring that a Revocable Trust continues effectively and matches a Trust creator’s vision is cemented by intelligent use of Trust Amendments.
Irrevocable Trusts combine Probate and Ancillary Probate avoidance with Medicaid Asset Protection capabilities. With added protection comes loss of direct control. A creator of an Irrevocable Trust must choose one or more third party Trustees to manage the Trust and its assets. Chosen Trustees often include adult children, siblings, other close relatives or financial institutions when there is a lack of close family or friends. Irrevocable Trust planning for Medicaid is a prudent planning option when an individual is not anticipating long term care in the immediate future. Irrevocable Trusts bestow a life estate on a Trust creator’s primary residence when it is placed in the Trust. This allows the STAR Exemption to remain attached to the property as well capital gains benefits if and when the property is sold.
Supplemental Needs Trusts
Supplemental Needs Trusts (“SNT’s”) hold and protect assets for disabled individuals. The financial limitations imposed by governmental entitlement programs including Medicaid have made it imperative to implement SNT’s to allow a disabled person to experience a proper lifestyle. Two major types of SNT’s are First Party SNT’s and Third Party SNT’s:
First Party SNT’s hold money directly belonging to, owed to or being paid to the disabled person. The Trustee of a First Party SNT is responsible for paying expenses that directly benefit the disabled person. The list of approved expenses is large and can range from home décor to travel costs. Life insurance premiums and gifts to third parties are not approved expenses. One limitation of this type of Trust is that New York State will be the primary beneficiary of the Trust as a function of its role in providing entitlement services. If there is money left over after this form of recoupment, then other named beneficiaries may inherit the balance.
An offshoot of the First Party SNT is the Supplemental Needs Pooled Trust which when utilized with Community Medicaid will hold a disabled person’s excess income allowing them to remain Medicaid eligible and pay a similar range of expenses. Although we assist with the set-up of Pooled Trusts our firm does not draft them. Pooled Trusts are managed by many non-for-profit agencies throughout New York. One important feature of Pooled Trusts is the requirement that any funds remaining in the Pooled Trust following the death of the disabled person shall remain with the Pooled Trust provider.
Third Party SNT’s are Trusts funded with money not belonging to the disabled person. Third Party SNT’s are often created by parents or siblings who want to ensure that their loved one can maintain a proper lifestyle while also receiving governmental entitlements. Third Party SNT’s have no beneficiary limitation since it is not the disabled person’s funds deposited in the Trust. Transfers to these Trusts may also be characterized as exempt transfers for Medicaid purposes if the disabled person is under 65 at the time of the Transfer – benefitting both parties.