By Elizabeth A. Caruso, Esq.
Myth or Fact? An irrevocable trust can never be changed.
This is a Myth!
It’s an age-old lawyer joke that their answer to every question is “it depends,” but in this instance, this answer hits the nail on the head. The true “irrevocability” of an irrevocable trust depends on a lot of factors.
Understanding the premise and use for irrevocable trusts will help with understanding why the answer is “it depends.” Irrevocable trusts are a commonly used estate planning tool to start the five-year look-back period for Medicaid countability of assets. Assets placed into a properly drafted irrevocable trust are not countable toward qualification thresholds for Medicaid benefits after five years. The key here is “properly drafted.” The trust must be irrevocable and the person seeking benefits cannot be a beneficiary of the principal. Oftentimes, the person seeking benefits should not be the trustee or the income beneficiary either. As you can see, with an irrevocable trust, there is a lot of power given away over the principal assets.
The amount of control given up when creating an irrevocable trust can make people understandably hesitant to create one in the first place. However, many people see the benefits outweighing the negatives. There are also some small additions that can be made to irrevocable trusts to keep some power in your hands. These additions can include the ability to change trustees or change beneficiaries through a retained power of appointment. You can begin to see where your decisions are becoming less irrevocable and more along the line of “it depends.”
If you are looking to make a big amendment or terminate an irrevocable trust, you’re beginning to see the trend, it depends on how the trust is written. Some trusts allow all original creators and beneficiaries to come together and agree to end the trust. Some trusts allow for an independent trustee or trust protector to be named to make any changes to the trust. Lastly, there are probate court interventions that can be filed that can terminate or change irrevocable trusts.
An elder law attorney can review your specific situation, whether you already have an irrevocable trust or if you are thinking about creating one as part of your overall estate plan, and advise you on where you are on the “it depends” line.
About the Author: Elizabeth A. Caruso, Esq. is an attorney at Legacy Legal Planning, LLC, in Norwell. She has been practicing estate planning, probate, and elder law on the South Shore for more than a decade. If this article has sparked questions for you, please feel free to reach out via phone 781-971-5900 or email elizabeth@legacylegalplanning.com to schedule a time to discuss your unique situation.
