Oftentimes, clients will start a meeting with me by saying they want to put their house into an irrevocable trust because somebody told them that was the only way to protect it. But there are many factors to consider when deciding whether you want to put your property or assets into an irrevocable trust.
First, you should know that once you put it in, you can no longer access the principal. That means if it is sold, the entire sale proceeds must stay inside the trust. You can purchase another property with it, but you could not use those funds for assisted living, for example. You would not be in charge of the sale of the property; that would be up to the trustee. So if the trustee does not agree with selling it, you cannot do anything. For an irrevocable trust to work, you must be willing to give up complete and ultimate control.
Second, you must have enough assets outside of the trust to live on for the rest of your life. If putting a property into the trust, you should also put some cash into it to pay for repairs, taxes, and insurance for the duration of the trust. If you do not have substantial assets outside of the property, this may not be the best option for you.
Third, what will your quality of life be for your remaining years? It is noble to want to give what you have to your children or grandchildren, but you worked hard for your assets, and you should be able to enjoy them while you can. Remember: inheritances to children are gifts, not rights.
Fourth, in New Hampshire, irrevocable trusts created to qualify for Medicaid are heavily scrutinized, and many times the applicant is denied if he or she has such a trust. So if your goal is to protect the house in order to qualify for Medicaid, note that in New Hampshire this may not work.
In some instances, the irrevocable trust is a perfect tool to protect property, such as vacation homes and rental properties. But it is important to note that it is not perfect in all instances. There are other ways to achieve your goals. Call Holly Lynch Law to discuss these.