Trusts are an estate planning tool that can protect your assets and minimize tax consequences to your estate. A trust can be used to convey property. The main types of trust are revocable trusts and irrevocable trusts. A revocable trust is one where the trust’s grantor retains control of the trust and its assets and can terminate or change the trust. An irrevocable trust is where the grantor sets up the terms of the trust and thereafter has no further control or right to change or terminate the trust.

This irrevocable trust is used to qualify and individual to receive Medicaid benefits. The irrevocable nature of the trust separates the control and the benefits related to the benefits of the ownership of the asset. Medicaid laws currently have a five year look back rule. This means that assets that are placed in an irrevocable family trust cannot be touched by Medicaid after they have been in the trust for a period of five years.

Assets passed to beneficiaries thought the use of a trust avoid the probate process. Trusts which are private instruments and do not have to be filed with a court. This is different from a will, which is a public document subject to probate. Assets received from a trust can be transferred in a simple manner after the death of the individual creating the trust. One reason to enter into a trust is to avoid the probate process. The assets in a trust pass quickly to beneficiaries with reduced costs and legal fees.

The tax benefits and consequences of a trust differ depending on whether it’s a revocable or an irrevocable trust. You should consult with an experience estate planning attorney to discuss the implications and the use of the different trusts.