Often we are contacted by individuals who want to set up a trust; they come to us convinced that they need a trust because of something they heard on tv or saw online.
Usually, these individuals are misinformed about the absolute necessity of a trust, and they are not aware of other less expensive options that are a better fit. This is especially the case in a place like Long Island where the greatest asset a person has is usually their home. When total assets are minimal, a trust is not always the most appropriate solution.
Pitfalls of an Irrevocable Trust
One of the biggest issues we see with trusts is that clients often don’t realize that once an asset is placed into an irrevocable trust, it’s very hard to revoke. Additionally, in order to comply with Medicaid rules, the grantor can only live off of the income from the trust — the principal cannot be touched.
Unfortunately, a lot of people do not realize this, and they end up spending the income AND the principal, often only a few dollars, which violates the terms of the trusts and subjects the trust assets to Medicaid availability. Sometimes this happens in the fourth-year of the five-year look back period and can cause a “resetting of the clock.”
Determine Your Goals
The decision to create a trust depends on your overall goals. Are you wanting to protect all or some of your assets from Medicaid? Are you trying to avoid probate, because you don’t want your family to have to seek court intervention?
Before considering any kind of trust, it’s important that you speak to a professional. At our firm, we work with our clients on a case-by-case basis, taking into account the whole picture before recommending a trust or any other kind of planning tool.
Consult with a qualified Elder Law Attorney to get it done right from the start.
Michael J. Fedele, Esq.
SCHNEIDER, GARRASTEGUI & FEDELE PLLC
135 Pinelawn Road
Suite 110 South
Melville, NY 11747
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