Living trusts can either be revocable or irrevocable. There are several types of irrevocable trusts, but I will discuss only one, the Medicaid Qualifying Irrevocable Living Trust.
A revocable trust enables the trust maker(s) to avoid probate and the expenses probate generates. It also enables a husband and wife to make provisions which will insure that they maximize their tax credits. A revocable living trust also enables the trust maker(s) to decide how their assets will be handled if they become incapacitated and when they die. One important fact to bear in mind, when deciding which trust is right for you, is that assets in a revocable trust are still exposed to nursing home and home health care expenses.
A Medicaid Qualifying Irrevocable Living Trust also avoids probate. However, its principal purpose is to protect assets from mandatory spend down in the event of a need for long term care or nursing home care.
With a Medicaid Qualifying Irrevocable Living Trust you can’t be your own trustees, but you can appointment your children, other relatives, or close friends to serve as your trustees.
With a Medicaid Qualifying Irrevocable Living Trust assets cannot be removed from then trust for your own benefit, but you would be the income beneficiary. When establishing a Medicaid Qualifying Irrevocable Trust you should not put liquid resources, which you might need to support your life style, into the trust.
Many people fund their Medicaid Qualifying Irrevocable Living Trust only with their real property, including their home. The trust can and should provide for the lifetime use of such real property. However, since the trust owns it, once it has been in the trust for five (5) years to cover the look back period, you cannot be compelled to liquidate and use the principal for nursing home or home health care expenses.
If you protect your real property in a Medicaid Qualifying Irrevocable Living Trust, if you decide to sell the property at a later date, the proceeds of sale can be deposited in a bank account in the name of the trust. To the same extent that the real property was protected, the proceeds of sale would be protected.
If you may be interested in having either a revocable or a Medicaid Qualifying Irrevocable Living Trust, the experienced estate planning attorneys at Klein & Sanchez would be happy to offer you a free consultation.