Trusts

Trusts

Trusts can manage assets during your lifetime and direct how they are distributed after death. Common types of trusts include revocable trusts, irrevocable trusts, special needs trusts, and testamentary trusts.

Revocable Trust

A revocable trust (sometimes called a “living trust”) can usually be changed, amended, or revoked entirely by the Grantor at any time during their lifetime, as long as they remain competent to do so. A ‘Revocable Living Trust’ is often used to provide more sophisticated planning when significant assets are involved; in a second marriage situation or when an individual owns property in more than one state. Because the Grantor retains control over the trust’s assets, they are typically still considered part of the Grantor’s estate for Medicaid planning and tax purposes and remain accessible to creditors.

The primary appeal of a revocable trust is flexibility combined with probate avoidance — assets held in the trust generally pass to beneficiaries without going through the probate process, which can save time, reduce costs, and keep the details of the estate private. Many people also use a revocable trust to plan for incapacity, since a successor trustee can step in to manage the assets if the Grantor becomes unable to do so.

Irrevocable Trust

Sometimes generically called an ‘Asset Protection Trust’, an irrevocable trust can help a family protect a lifetime of savings from the potentially exorbitant cost of nursing home care, ensure a healthy spouse can maintain their standard of living, protect the family home from estate recovery upon the death of a nursing home resident, or assist a Veteran in obtaining government benefits.

Once established, an irrevocable or asset protection trust generally cannot be altered, amended, or revoked without the consent of the beneficiaries or a court order — the Grantor gives up control over the assets placed into it. In exchange for this loss of flexibility, an irrevocable trust often provides significant benefits: because the assets are no longer legally owned by the Grantor, they are typically removed from the Grantor’s taxable estate and may be shielded from creditors or lawsuits. Irrevocable trusts are commonly used to protect assets in order to qualify for Medicaid or VA benefits for long-term care; for advanced estate tax planning, or charitable giving strategies.

Special Needs Trust

A special needs trust (sometimes called a “supplemental needs trust”) is structured to hold and manage assets on behalf of a beneficiary with a disability, without disqualifying that person from means-tested government benefits such as Medicaid or Supplemental Security Income (SSI). Rather than providing funds directly to the beneficiary — which could push them over asset or income limits — the trustee uses trust funds to pay for supplemental items and services that improve the beneficiary’s quality of life, such as education, therapy, transportation, or recreation. These trusts can be funded by a third party (such as a parent) or, in some cases, with the beneficiary’s own assets, which affects how the trust must be structured under the law.

Testamentary Trust

A testamentary trust is created within a person’s will, so it only comes into existence after the Grantor’s death and once the will has gone through probate. Unlike a living trust, it offers no probate avoidance, since the assets pass through the estate first. Its main advantage is the ability to control how and when assets are distributed over time — for example, appointing a trustee to manage funds for minor children until they reach a specified age, or providing for a beneficiary in stages rather than a lump sum. Because it’s part of the will, any changes to the trust’s terms require amending the will itself.