Legal Question in Elder Law in New York

Re: Irrevocable trusts

Both of the options you are considering involve transferring your assets to a third party in order to position yourself for Medicaid eligibility in the event you or your spouse need long-term care. If the assets you transfer are tax deferred (IRA, 401k, etc.)you will incur immediate income tax consequences. So don't transfer tax deferred assets without consulting your attorney or accountant.

If you make outright transfers to your children, you will lose control of those assets, lose the income generated by them, and your kids will get the asset with your tax basis. So if you give them stock or real estate that has appreciated in value, they may face a capital gains tax problem when they sell.

If you make the transfer to an irrevocable trust, you will retain the income generated by the asset, and avoid the capital gains tax problem. And because there is no such thing as an "irrevocable trust" in New York, you never lose control of the asset. Section 7-1.9 of New York's Estates Powers and Trust Law permits even irrevocable trusts to be revoked, as long as your beneficiaries all consent. And if your trust agreement allows you to change the trust beneficiaries, you can always obtain their consent (or else they won't be beneficiaries any more).

For more information, contact me by e-mail.

Re: Irrevocable trusts

It is very difficult to answer your question without further information. In order to devise an elder law plan - (a plan to protect your assets from the costs of long term care) an elder law practioner would need to know several things that are not included in your post such as what your assets were, what your health status is, and what your goals are. What I can tell you is that both of the proposed plans that you included in your post would be a movement in the right direction. Most plans include transfers of assets to spouses or children. Whatever is transferred will ultimately (after the passage of time) be protected. Transfers can include direct gifts such as the $20,000 gift to your daughter or a gift to a trust for your benefit and ultimately your daughters. If you would like to speak to me about this further, you can email me. I can give you further information over the telephone, as well.