Wealth Protection

In New York, the use of trusts as a tool for asset protection and Medicaid planning is a strategic approach to ensure long-term financial security, particularly in the context of covering potential long-term care costs. Here's an outline of how trusts can be utilized for these purposes:

1. Irrevocable Trusts for Asset Protection:

• Definition: An irrevocable trust is a legal arrangement in which the grantor (the person creating the trust) transfers assets into the trust and relinquishes control over them.  
• Protection from Creditors: Assets in an irrevocable trust are generally protected from creditors because they are no longer considered the personal assets of the grantor.
• Estate and Gift Tax Benefits: Transferring assets into an irrevocable trust can reduce estate taxes and might also have gift tax implications.

2. Medicaid Asset Protection Trusts (MAPTs):

• Purpose: MAPTs are specifically designed to protect assets while allowing individuals to qualify for Medicaid in the future. They are a type of irrevocable trust.
• Medicaid Look-Back Period: In New York, Medicaid has a look-back period of 60 months (5 years) for nursing home care. Assets transferred to a MAPT more than 60 months before applying for Medicaid are not counted as part of the individual’s assets.
• Income Generation: The grantor can receive income generated by the trust’s assets, but they cannot access the principal.

3. Supplemental Needs Trusts (SNTs):

• Beneficiaries with Disabilities: SNTs are used to benefit individuals with disabilities, including those who may receive Medicaid and other government benefits.
• Asset Management: An SNT allows a trustee to manage and utilize trust assets for the beneficiary’s benefit without disqualifying them from government assistance.

4. Key Considerations in Trust Formation:

• Choosing the Right Type of Trust: It’s crucial to select the appropriate trust type based on individual circumstances and goals.
• Timing of Asset Transfer: The timing of transferring assets into a trust is critical, especially concerning Medicaid’s look-back period.
• Selection of Trustees: Trustees must be chosen carefully, as they will have control over the trust assets and the responsibility to manage them in the best interests of the beneficiaries.

5. Legal and Financial Advice:

• Consultation with Experts: It’s advisable to consult with legal and financial experts who specialize in estate planning and elder law to ensure compliance with Medicaid rules and to optimize asset protection.

6. Regular Review and Adjustments:

• Monitoring Changes in Law and Circumstances: Trusts should be reviewed periodically to ensure they remain aligned with changing laws, regulations, and the individual’s personal circumstances.

In New York, there are several types of trusts, each designed for specific purposes. Below is a detailed definition of each major type of trust and the general process for creating them:

1. Revocable Living Trust:

• Definition: A Revocable Living Trust is created during the grantor’s lifetime and can be altered or revoked at any time. The grantor typically retains control over the trust’s assets.
• Creation Process:
  • Draft a trust agreement detailing the terms, beneficiaries, and how the assets should be managed and distributed.
  •   Sign the trust document in the presence of a notary.
  • Transfer assets into the trust (e.g., real estate, bank accounts).
  • The grantor often serves as the initial trustee, managing the trust assets.