By Elizabeth A. Caruso, Esq.
Not all trusts are created equal. Because of that, what trusts do and do not accomplish will be very specific to your written document, or the one being crafted for you. I’m going to focus this article on what trusts do not do.
Trusts do not fund themselves. If you create a trust, you must proactively put assets into it. It is not as simple as just writing into the trust how you want certain assets to be distributed upon your death or creating an inventory of your assets and then attaching that inventory to your trust. You must retitle assets that you want to be in the trust to the name of the specific trust. The trust must become the owner of the asset. For real estate, this is executing a new deed. For bank accounts, this may mean opening a new account in the name of the trust and transferring your funds. The only other way fund a trust is to name the trust as a beneficiary of an account. Many people do this with life insurance policies or retirement plans.
Because trusts do not fund themselves, they also do not override other estate planning documents. Jointly held assets will still pass to the surviving joint holder. Assets with beneficiary designations will still go to the named beneficiary. Unless the asset is specifically owned by the trust, the trust cannot control its distribution.
Lastly, all trusts are either revocable trusts or irrevocable trusts at their core, and then the complexity of the trust changes from there. Assets owned by both revocable and irrevocable trusts avoid probate. However, only assets in specifically drafted irrevocable trusts start the five-year look back period for Medicaid eligibility. This is a very important distinction that many people miss and why it is critical for you to understand what your trust does and does not do for you.
An elder law attorney can help you to review trusts that have been previously drafted for you, explain to you how they work, and tell you what your trust does and does not do. If you do not already have a trust, an elder law attorney can work with you to create a trust that fits your needs and goals.
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.
