why would i use an irrevocable trust in new york

Why Would I Use an Irrevocable Trust in New York? www.myestateplan.com 1

“Irrevocable trusts can facilitate eligibility for Medicaid coverage, and this is an important thing to think about,

because most people will need living assistance. Medicare does not pay for long-term care, so you

cannot look in that direction for support.”

WHY WOULD I USE AN

IRREVOCABLE TRUST IN

NEW YORK?

MARK S. EGHRARI NEW YORK ESTATE PLANNING ATTORNEY

http://www.myestateplan.com/



People sometimes paint with a broad brush when it comes to estate planning, and

this is typically due to a lack of information. They assume that you can use either

a will or a trust as an asset transfer vehicle when you are planning your estate.

They are not aware of the fact that there are multiple different types of trusts, and

they serve various different respective purposes.

THE POWER OF REVOCATION

One major distinction between the types of trusts is the matter of revocation.

There are trusts that you can revoke or rescind, and there are also irrevocable

trusts that cannot be dissolved once they have been created.


It can seem disconcerting to create a trust that you can never revoke, because it is

a final decision. At the same time, there are some very good reasons why you may

want to use an irrevocable trust of some kind. Let's look at some of them.

MEDICAID PLANNING

Around 70 percent of senior citizens are someday going to need long-term care

according to the government website

longtermcare.gov. Nursing homes

are exorbitantly expensive, especially

here in New York, where we practice

law. It can cost you well over

$100,000 to spend a year in a

nursing home, and people often

spend multiple years receiving

nursing home care.

If you are thinking that Medicare will

pick up the tab if you ever need living

assistance, we have some bad news

for you. This program will pay for

convalescent care after an injury or

illness, but Medicare will not pay for

custodial care, which is the type of

care you would receive in a nursing home.


Medicaid does pay for long-term care, but you are probably aware of the fact that

the program is only available to people with a significant level of financial need.

To qualify for Medicaid, people often divest themselves of assets. If you were to

convey assets into an irrevocable Medicaid trust, they would not be counted if

you were ever to apply for Medicaid to pay for long-term care.

Plus, if you need income while you are living independently, you could receive

income from the earnings of the trust, but the principal would not count if and

when you apply for Medicaid coverage.

ESTATE TAX EFFICIENCY

Financially successful people should be aware of the possible imposition of estate

taxes. The federal estate

tax can be applied on

transfers that exceed

$5.43 million. In New

York, there is also a state-

level estate tax, and until

April of 2016, the

exclusion is just $3.125

million.

To gain estate tax

efficiency, you could convey assets into an irrevocable wealth preservation trust.

Generation-skipping trusts, grantor retained annuity trusts, charitable lead

trusts, and qualified personal residence trusts are some of the trusts that are used

for estate tax efficiency purposes.


SPENDTHRIFT ASSET PROTECTION

You may have someone on your inheritance list who is not particularly good at

handling money. Under these circumstances, you could provide for this person

through the creation of an irrevocable spendthrift asset protection trust.

Assets that have been conveyed into this type of trust would be protected from

the beneficiary's creditors, and a trustee would handle the assets on behalf of the

beneficiary.


SUMMARY

When you create a trust that cannot be revoked, you are surrendering incidents of

ownership. This can seem risky, but there are some good reasons why you may

want to use this type of trust.

Irrevocable trusts can facilitate eligibility for Medicaid coverage, and this is an

important thing to think about,

because most people will need living

assistance. Medicare does not pay for

long-term care, so you cannot look in

that direction for support.

Death taxes can take a heavy toll on

your legacy if you are exposed, but

fortunately, there are irrevocable

trusts that can be used to provide

estate tax efficiency. You could also

protect assets through the utilization

an irrevocable trust.

Contact a licensed estate planning

attorney if you would like to find out

exactly what type of trust you should

utilize. Many attorneys will provide no obligation case evaluations, so you can

often begin the relationship without making any firm commitments.


REFERENCES

American Bar Association http://www.americanbar.org/groups/real_property_trust_estate/resources/estate_planning.html Internal Revenue Service https://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Estate-Tax United States Department of Health and Human Services http://longtermcare.gov

http://www.americanbar.org/groups/real_property_trust_estate/resources/estate_planning.html

http://www.americanbar.org/groups/real_property_trust_estate/resources/estate_planning.html

https://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Estate-Tax

http://longtermcare.gov/


About the Author

Mark S. Eghrari

Mark S. Eghrari is an attorney in private practice in Smithtown, New

York. He has been in practice since 1988. Mark S. Eghrari provides

extensive estate and tax planning services to individuals and

businesses. Mr. Eghrari’s primary focus is helping clients avoid

probate, minimize or eliminate Federal and State Estate taxes and

protect their assets from the high cost of nursing care, if they become

ill. Mr. Eghrari’s expertise is in providing unique and innovative

estate planning solutions that create a secure future for his clients and their loved ones. Mr.

Eghrari is a member of the American Bar Association and New York State Bar Association as

well as the National Academy of Elder Law Attorneys and the American Academy of Estate

Planning Attorneys.

Mr. Eghrari completed his undergraduate work at Lafayette College in Easton, Pennsylvania

and received his MBA in banking and finance from Hofstra University on Long Island. He

earned his Juris Doctorate from the Hofstra University School of Law, where he was a member

of the Law Review. While in law school, Mr. Eghrari gained practical experience in the

corporate tax department of Citicorp in New York city.

Mark S. Eghrari and Associates PLLC www.myestateplan.com 50 Karl Avenue, Suite 202 Smithtown, NY 11787 Phone: (631) 265-0599 Fax: (631) 265-0754
