A. In New York, the advantages to using an Irrevocable Trust are the same as in a Revocable Trust except that an Irrevocable Trust provides the following additional benefits:
- Under the Medicaid laws any assets that you can withdraw from your trust are not protected. Medicaid will require you to use those assets towards the cost of medical care. A revocable trust does not protect your assets in the event of a catastrophic illness. Since you can revoke the trust, Medicaid can force you to revoke the Trust and withdraw all the Trust assets and use those assets towards the cost of care. The only type of Trust that will truly protect resources in the event of a catastrophic illness is an Irrevocable Trust where the language of the Trust Agreement appropriately complies with the federal and state Medicaid requirements;
- Creditors will not be able to seize and sell your assets from a irrevocable trust;
- When assets are transferred directly to children, the children become the owners of those assets. Most of the risks and disadvantages involved in transferring assets directly to children can be avoided with a properly written Trust Agreement. For example, a well written Trust:
- will not result in income tax consequences for children.
- will not cause financial aid problems for grandchildren.
- will not cause trust assets to be vulnerable if a child is sued, involved in a divorce, or has other personal problems.
- will not result in gift tax liability
- By establishing Irrevocable Trusts with the appropriate language, each spouse can obtain the federal estate tax exemption;
- If you establish your own Irrevocable Trust and later become incapacitated, your designated Trustee can manage your assets in the trust with virtually no difficulties. This allows for your estate planning investments to remain intact; and
- Peace of mind.