Some people misunderstand trusts as a way for the wealthy to leave a fund so their children do not need to work, but those trusts only scratch the surface. Trusts are a unique, adaptable legal tool often part of a comprehensive estate plan. Some trusts are revocable, allowing the creator to take back trust assets. Others are irrevocable and offer many benefits, like asset protection and a reduced tax burden. In exchange, they limit your control over trust assets.

To speak with an irrevocable trust lawyer in New York, contact the Law Office of Andrew M. Lamkin, P.C.. Our office exclusively practices estate planning law, so we have the experience to understand the many ways to tailor a trust to you. Reach out to learn more about how our New York irrevocable trust attorney can help you understand your options, select a trust type, and create your trust.

Understanding Irrevocable Trusts with a New York Irrevocable Trust Attorney

Trusts are legal arrangements that modify access to and control of assets. The trust’s creator (grantor) funds the trust, the beneficiaries receive benefits, and the trustees administer it. Grantors can undo revocable trusts but typically cannot undo irrevocable trusts. A New York Irrevocable Trust Attorney can help navigate these complexities.

Irrevocable trusts come in two basic forms: testamentary and living trusts. When you create a trust to be funded after you die, it is a testamentary trust. When you create and fund a trust during your lifetime, it is a living (“inter vivos”) trust.

Common Types of Irrevocable Trusts

There are different types of trusts, with irrevocable trusts often used for specific purposes like protecting assets and minimizing taxes.

Medicaid

Medicaid long-term care coverage includes a five-year look-back period. If you give away or transfer assets during the look-back period, you are penalized—delayed from receiving Medicaid long-term care coverage, regardless of whether you qualify.

Two trust types can alleviate this burden: Medicaid Asset Protection Trusts (MAPTs) and Miller Trusts (Medicaid income trusts). If created at least five years before you receive Medicaid, these trusts lower your income and resources for qualification purposes. 

Asset Protection

You may transfer assets into a trust and not retain functional control over them. This technique sometimes shields assets from creditors, especially if someone other than you currently benefits.

Tax Reduction

Many irrevocable trusts primarily minimize gift or estate taxes. Several of these trusts involve one spouse transferring assets into a trust to benefit the other, including:

  • Bypass (marital) trusts,
  • Spousal lifetime access trusts (SLATs),
  • Qualified domestic trust (QDOT), and
  • Qualified terminable interest property (QTIP) trusts.

Others involve the grantor retaining the right to regular annuity or income payments, like:

  • Grantor-retained annuity trusts (GRATs), 
  • Grantor-retained income trusts (GRITs), and 
  • Grantor-retained unitrusts (GRUTs).

In generation-skipping trusts, grandparents provide for grandchildren and bypass inheritance taxes their children would have owed. In qualified personal residence trusts (QPRTs), the grantor places their personal residence in trust, removing it from their estate but retaining the right to live there.

Life Insurance

Irrevocable life insurance trusts (ILITs) can help you protect your life insurance proceeds from taxes, especially estate and gift taxes. ILITs can also help you or someone else qualify for or maintain government benefits after receiving an insurance payout.

Charitable

Through a charitable trust, you can benefit your favored charitable causes. Charitable lead trusts and charitable remainder trusts are common irrevocable charitable trusts.

In a charitable lead trust, you designate a period during which a charity receives trust payments. At the end of the term, trust assets pass to a noncharitable beneficiary.

In a charitable remainder trust, the trust makes regular payments to noncharitable beneficiaries for a set time. After the term ends, trust assets pass to a charitable beneficiary.

Overlap with Revocable Trusts

Several types of trusts can be revocable or irrevocable. Revocable trusts that last beyond the grantor’s lifetime become irrevocable upon the grantor’s death. Some of these overlapping trusts include:

  • Special or supplemental needs trusts—provide for a loved one who receives disability, Supplemental Security Income (SSI), or similar benefits without jeopardizing their benefits;
  • Minor trusts—benefit minors until they reach a certain age; and
  • Spendthrift trusts—shield assets while providing for someone who struggles to manage money.

Trusts can also serve many purposes tailored to your unique needs and goals.

Pros and Cons of an Irrevocable Trust

Irrevocable trusts include several pros, like:

  • Tax savings,
  • Medicaid and benefit qualification,
  • Probate avoidance, and
  • Asset protection.

The main drawback is the lack of control. Once an irrevocable trust is funded, you cannot make changes or revoke it.

How Can a New York Irrevocable Trust Lawyer Help?

With the advice of an irrevocable trust attorney in New York, you can determine what kind or kinds of trusts work best for your needs. Andrew M. Lamkin is a New York irrevocable trust lawyer with many years of experience and a focus on estate planning law. Contact us to learn how trusts could help you.