Who Owns the Property in an Irrevocable Trust in New York City

The legal owner of the property in an irrevocable trust is the trustee. However, this trustee only manages the trust property for the benefit of the beneficiaries.
The grantor would transfer the trust property to the name of the trustee. For example, the grantee would be named, “ABC, as Trustee of XYZ Irrevocable Trust.” And the trust would specify who benefits from the property and how.

What is an Irrevocable Trust?

An irrevocable trust is a trust that cannot be amended, modified, or revoked by the grantor without the consent of all the beneficiaries. In an irrevocable trust, the grantor transfers property to the trustee, who then administers the property for the benefit of the beneficiaries in accordance with the provisions in the trust document. The grantor cannot take back this property anymore once it is transferred to the trust. Hence, its irrevocability.

Because an irrevocable trust cannot be amended, modified, or revoked, it is considered an entity separate and independent from the grantor. The irrevocable trust will have its own tax identification number (EIN) and will report the income of the property using its own EIN and not the grantor’s social security number. Because the trust property is considered owned by the irrevocable trust and not the grantor’s, property transferred to the irrevocable trust is protected from the grantor’s creditors. For these reasons, irrevocable trusts are normally used to reduce one’s assets for purposes of Medicaid eligibility and to shield assets from Medicaid recovery.

Irrevocable Trust Property is Not Considered Grantor Property

Property in an irrevocable trust is not considered the grantor’s property. When the grantor is applying for Medicaid, his property transferred to an irrevocable trust before the lookback period (usually 60 months prior to applying for Medicaid, but in New York, 30 months beginning March 31, 2024 for Medicaid home care) will not be considered his property. Thus, the irrevocable trust allows the grantor to reduce his assets on paper.

Irrevocable Trust Property Where Grantor Retains Life Estate

It is still an irrevocable trust, even if the grantor retains a life estate for himself. The inclusion of a life estate for the grantor does not change the trust’s irrevocable nature of the transfer. The grantor still cedes complete control and ownership over the trust property to the irrevocable trust, which the trustee then manages in accordance with the trust provisions.

Because the irrevocable trust cannot be amended, modified, or revoked, a lot of individuals are wary about transferring property to an irrevocable trust. However, the need to have an irrevocable trust due to creditor protection, Medicaid eligibility, and protection from Medicaid recovery, most often prevails.

Drafting an irrevocable trust requires the expertise of an attorney, especially when a grantor retains a life estate or becomes a lifetime income beneficiary. It is important that, despite the grantor retaining these benefits, the irrevocable trust’s provisions still comply with tax or Medicaid laws to ensure that such irrevocable trust will serve its purpose.

Should you need assistance in drafting an irrevocable trust, we at the Law Offices of Albert Goodwin are here for you. We have offices in New York City, Brooklyn, NY and Queens, NY. You can call us at 212-233-1233 or send us an email at [email protected].