Does a revocable trust protect assets? What is a trust?
A common question we receive from clients is whether they can use a revocable trust and still accomplish their goal of protecting their assets in the event they need to enter a nursing home. The simple answer is no. To understand why this is the answer we must take several steps back and begin with the question … what is a trust? Only after we understand what a trust is can we understand what a revocable trust is, what an irrevocable trust is, and why the irrevocable trust can protect assets.
I describe trusts to clients as legal papers designed by the client and the attorney which create the interrelationship between the four elements of any trust; the four elements are:
- Grantor, sometimes also known as the trustor, creator, or settlor (all synonymous),
- Beneficiary or beneficiaries, and
- Property or corpus or res (again these terms are synonymous),
Every day my office is requested to create trusts for clients. Sometimes clients come in and request a trust often stating “I need a trust.” My response is usually something like, “well … which one? My office prepares over fifty different types of trusts.” What I am trying to learn is what the client’s goals are. Different trusts serve different purposes and some trust can serve a multitude of purposes simultaneously.
One way to begin to differentiate the types of trusts is to understand the difference between living trusts and testamentary trusts. A living trust (sometimes called an inter vivos trust) is a trust created, funded, and used now. Compare this to the testamentary trust which is created within a person’s Last Will and Testament and is not used (lying dormant) until that person passes away and then begins to be used.
To be continued ….
Aaron E. Futterman, CPA, Esq. is a partner in the law firm of Futterman & Lanza, LLP with offices in Smithtown, NY and clients throughout Suffolk, Nassau, Queens, Brooklyn, Bronx, Richmond, New York, Westchester and Rockland Counties. He concentrates his practice to Elder Law, Medicaid Planning, Medicaid Applications, Estate Planning, Probate, Estate Taxes, and Estate Administration.