You’ve probably heard you need a trust to keep your family out of court and maybe out of conflict in the event of your death or incapacity. And, if you haven’t, you are hearing it now. If you own any “probatable” assets in your name at the time of your incapacity or death, your family must go to court for permission to access them. If you aren’t sure if your assets are “probatable” contact us to discuss.
But you may need clarification about whether you need a revocable living or irrevocable trust. More and more, people are coming our way asking for an irrevocable trust, so this article is designed to help you learn the difference so you can be prepared to have a conversation about the right kind of trust for you and your loved ones.
What Is A Trust?
A trust is an agreement between the grantor of the trust (that’s you) with a trustee (someone named by you) to hold title to assets for the benefit of your beneficiaries (whoever you name to receive your assets). When we break it down in its simplest form, it’s that straightforward. It’s an agreement.
Now, the terms of that “agreement,” called a “trust agreement,” can vary significantly, and that’s where we work with you to clarify the terms that you want between the trustee and you, for the benefit of the people you name as beneficiaries.
With a revocable living trust (RLT), prepared for use during your lifetime and after your passing, you will be the “grantor,” the “trustee,” and the “beneficiary.” So, for all intents and purposes under the law, nothing really happens when you retitle your assets to the name of your RLT, while you are living and have the capacity (ability to make decisions for yourself).
With an RLT, once you become incapacitated (which is determined as per the instructions in the trust document) or in the event of your death, the trust becomes irrevocable, and the person or persons you’ve named as successor trustee steps in to control the assets held in the name of the trust for the benefit of the beneficiaries named in the trust. If you are still living but incapacitated, you would remain as the beneficiary. If you pass away, then your named heirs would be the beneficiaries. At that point, the trust may distribute outright to your beneficiaries or be held in continuing trust -- protected from creditors, future divorces, future lawsuits, and even estate taxes (if the trust is drafted properly) – if your trust terms provide for continuing protection.
You could indicate in the trust agreement that you want your beneficiaries to “control the trust” but that you want the trustee to continue to hold title to the assets, to protect the assets, while giving the beneficiaries nearly full control and use of the assets. This is a bit tricky, so don’t try it at home without support. But, if you want to provide this kind of benefit and protection to the people you love, be sure to talk with us about building a Lifetime Asset Protection Trust into your plan. It’s highly worth it if you’ll pass on anything more than what your children will immediately spend upon your death.
Now, let’s clarify what an irrevocable trust is and where it might fit into your plan.
An irrevocable trust is also an agreement between a grantor and a trustee to hold the property for a beneficiary. Since it is irrevocable, it cannot be changed. There are some exceptions to this, but for the most part, that is the case. If you put your assets into an irrevocable trust, you cannot then take them out of the trust and return them to yourself because the gift to the Trustee to hold the assets for the beneficiary is irrevocable.
An irrevocable trust can remove assets from your name and protect them from future lawsuits or future growth in your estate, which removes them from your estate for estate tax purposes. We will recommend irrevocable trusts when we are preparing your estate for the potentiality that you may need long-term nursing care that you would like covered by Medicaid without decimating your family’s inheritance, or on the other end of the spectrum, if you have an estate that could be subject to the estate tax or that could be at significant risk of lawsuits.
Never choose a type of trust without working with a lawyer who understands you, your family, your assets, and your goals. When you meet with us for our Planning Session, we’ll look at your assets, family dynamics, personal desires, and how the law will apply to all of it. Then, together, we will decide on the right plan for you -- whether to include a trust or not, whether that trust should be revocable or not, and how long it should last for the people you love.
Monet Binder, Esq., has her practice in Queens, dedicated to protecting families, their legacies, and values. All halachic documents are approved by the Bais Havaad Halacha Center in Lakewood, under the direction of Rabbi Dovid Grossman and the guidance of Harav Shmuel Kaminetsky, shlita, as well as other leading halachic authorities. To learn more about how a power of attorney can help you, you can send her an email at This email address is being protected from spambots. You need JavaScript enabled to view it. or call 718-514-7575.