What Would Happen If an Irrevocable Trust Owned Your House?
Trusts do more than make monthly payments to spoiled children and to spoiled adults whose trust fund payments prevent them from having to grow up. The main purpose of trusts is to keep assets out of probate, so that your heirs can inherit them directly, without creditors getting first dibs, which is what happens during the probate of an estate. You can establish a trust even if you do not have a substantial amount of money. Many homeowners transfer their houses to an irrevocable trust if they do not have long-term care insurance or enough cash savings to pay for as much long-term care as they will need. This way, when they run out of savings, they can apply for Medicaid. When a Medicaid long-term care beneficiary dies, Medicaid reimburses itself by filing a claim against the decedent’s estate. If the decedent owned a house, the court usually orders the estate to sell the house to pay the debt to Medicaid. Placing your house in a trust only keeps it safe from Medicaid claims if it is an irrevocable trust and if you transfer the house to it at least five years before becoming a Medicaid beneficiary. For help envisioning how your life would be if you gave up legal ownership of your house and transferred it to a trust, contact a Bronx estate planning lawyer.
What Is Irrevocable About an Irrevocable Trust?
A trust is an independent legal entity that is responsible for its own affairs after the grantor creates it and transfers property to it. Much like the brooms in The Sorcerer’s Apprentice, it does what it was programmed to do, and once it starts, the grantor cannot stop it. The grantor is not the boss of an irrevocable trust; rather, the trust instrument is. The trustees listed in the trust instrument are the only people who have access to the money in the trust. The grantor may continue living in a house that belongs to the trust, especially if the trust instrument lists this or if the grantor is also a beneficiary of the trust.
The trust instrument might indicate that the trustees can sell a house belonging to the trust at their discretion or by written request of the beneficiaries. The proceeds from the sale will then belong to the trust. If the trust instrument or the beneficiaries indicate this, the trustees may use the proceeds to buy another house, which will also legally belong to the trust. This was the subject of a recent Moneywise column. A retired couple had transferred their house to an irrevocable trust so that they could protect it from creditor claims, and their sons could still inherit it, if the parents ended up needing nursing home care benefits. Now that they were retired, they wanted to sell it and move to a smaller house.
Schedule a Confidential Consultation With a Bronx Estate Planning Attorney
An estate planning lawyer can help you establish a trust to protect your house from Medicaid creditor claims. Contact Cavallo & Cavallo in the Bronx, New York to set up a consultation.
Source:
msn.com/en-us/money/realestate/i-put-my-1-1m-home-in-an-irrevocable-trust-with-my-sons-as-beneficiaries-and-i-now-want-to-sell-it-but-am-i-forced-to-buy-a-house-of-equal-value/ar-AA1S9YyV?ocid=msedgntp&pc=ACTS&cvid=693afb27d2fe420ba7035a5540352aac&ei=14