One way to think about a trust is that the trust itself is a book of instructions. A grantor authors the trust, and provides instructions concerning the use of the grantor’s assets while the grantor is alive, including who is permitted to access the trust assets, and what will occur at the grantor’s incapacity and death. An inter vivos trust is created during the grantor’s lifetime, where a testamentary trust is established by a will.
Trusts can be revocable or irrevocable. A revocable trust is analogous to a treasure chest with an open lid, while the irrevocable trust is more of a locked, closed chest. With a revocable trust, it is commonplace for a grantor to have control over assets which go in and out of the trust. Irrevocable trusts, on the other hand, carry limited types of assets, and the removal of those assets is not typically a decision in which the grantor is permitted to make.
A beneficiary is the person who maintains a beneficial interest in the assets of the trust. An irrevocable trust can contain lifetime beneficiaries who have access to assets of the trust during the lifetime of the grantor, and residuary beneficiaries who have access to the assets of the trust upon the grantor’s death or at a time that the grantor specifies.
With a revocable trust, the trustee is often the grantor and the grantor’s spouse, and the grantor and grantor’s spouse are also beneficiaries during the lifetime of the grantor and the grantor’s spouse. With an irrevocable trust, the trustee is often not the grantor or the grantor’s spouse and the beneficiary during the grantor’s lifetime is not the grantor or the grantor’s spouse.
A trustee is a person who takes legal title to the trust assets, and can be an individual or a company. Think of the trustee as the holder of a key to the treasure chest, who can access the assets of the trust and distribute them to the beneficiaries in accordance with the terms of the trust. Trustees also take on the responsibility of funding the trust, which is the procedure to transfer assets from the grantor’s name to the trustee’s name. Trustees also administer and manage the trust by ensuring that distributions are correctly paid, accountings are done and furnished to beneficiaries, and investments and other trust assets are appropriately managed. A successor trustee is a trustee who takes over responsibilities from the acting trustee when the acting trustee either dies or becomes incapacitated.
Often, irrevocable trusts are used as a mechanism to protect assets so that those assets are not considered countable for purposes of Medicaid eligibility. Although assets in revocable trusts are considered countable for Medicaid eligibility, the trust can still provide for prudent management if the grantor is disabled or incapacitated, and can avoid the expenses and time-consuming nature of probate.
Given the complexities of trusts for elder law planning, it is important to discuss your situation with an attorney familiar with Florida’s Medicaid laws.