(record online) Strangely enough, in NY you may revoke “irrevocable” trusts. For many, the word “irrevocable” mistakenly means you may never again do anything to or with an irrevocable trust.
A living trust is a legal entity you create now while you are alive and transfer certain assets to the name of the trust. A living trust may be either revocable or irrevocable.
With a revocable trust, the grantor (person who creates the trust) may act as trustee (manager), may amend or revoke the trust, and has a right to all income and principal in the trust.
Elder law refers in large part to protecting assets from nursing home costs. The irrevocable Medicaid Asset Protection Trust (MAPT) protects assets from nursing home costs after assets have been in the trust for five years.
Although other types of irrevocable trusts exist, the irrevocable MAPT protects assets from nursing home costs. Two rules govern the MAPT. First, the grantors have a right to all income from trust assets but may not spend or use the principal in the trust. Second, the MAPT must be irrevocable.
A trust is irrevocable because the grantor may not revoke the trust alone. However, in New York you may revoke an irrevocable trust if all parties consent in writing to the revocation of the trust. The parties to the trust are often the parents and children.
For example, if parents want to revoke their irrevocable trust, the parents and their children must sign legal paperwork revoking the trust. If one of the children does not cooperate, then the parents may amend the trust to remove that recalcitrant child from the trust, and then revoke the trust with the remaining parties.
In New York, it is a misconception to think that an irrevocable trust is irrevocable. Although you must read each trust for specific provisions, you may amend irrevocable trusts, change who the beneficiaries are, change amounts to beneficiaries and even change trustees. You may also make gifts from the MAPT to your heirs at any time.
Although revocable trusts afford complete control to the grantors of the trust, only the irrevocable MAPT gives nursing home protection. Revocable trusts give no nursing home protection. Due to the “five-year look-back” rule, you must create the MAPT, and transfer assets to the trust, five years before those assets are protected from nursing home costs.
You are not giving up control by creating the irrevocable MAPT. Instead you are gaining control by protecting assets for your family and not the nursing home industry.