guardrails , so that the beneficiary receives a monthly stipend or gets access to funds at a certain age or upon the attainment of certain benchmarks , such as college graduation . Assets in this trust are not subject to the beneficiary ’ s creditor claims or divorce proceedings . Spendthrift trusts can be revocable or irrevocable .
# 4 : Medicaid Asset Protection Trust ( MAPT ). Someone who doesn ’ t have long-term care insurance might use a trust to protect assets meant for their heirs and ensure they aren ’ t taken by a nursing home or Medicaid . Such a trust is irrevocable and designed to protect assets from being counted for Medicaid eligibility . As long as the trust is created and assets transferred five years before the grantor applies for Medicaid long-term care benefits , the trust assets are excluded for Medicaid eligibility purposes . So , after the five-year look-back period , as long as the trust owns the assets , Medicaid cannot count and seize those assets to reimburse long-term care costs . The downside is that , because these are irrevocable trusts , the grantor loses control of the assets .
# 5 : Qualified Terminable Interest Property ( QTIP ) Trust . Among many who can benefit , this trust can be especially useful for a blended family . For example , it allows the grantor to provide income to the surviving spouse from his or her current marriage yet maintain control of how the trust ’ s assets are eventually distributed once the surviving spouse dies . In this case , the trust income is provided to the surviving spouse , but upon the surviving spouse ’ s death , the principal passes to the grantor ’ s specified beneficiaries . For instance , Peter and Jane get married , each with children from previous marriages . Peter establishes a trust where Jane is the income beneficiary , allowing her to access income during her lifetime . After her death , however , the remaining assets would then be distributed to Peter ’ s children from his previous marriage . As you just saw , this trust comes in handy in second marriages or if you expect your spouse to remarry after you die . The grantor maintains post-mortem control over eventual disposition of the principal after the death of the surviving spouse . For instance , the grantor might wish to provide income for the surviving spouse from trust assets , but upon the surviving spouse ’ s death , intend for the remaining principal to pass to his or her own kids . If an asset is left outright to the surviving spouse , that surviving spouse gains full control and can designate anyone as beneficiary of the inherited asset , potentially bypassing the grantor ’ s wishes . Note : QTIP trusts are irrevocable .
Trusts are more than just legal tools — they can be powerful bridges connecting your present plans to your future goals . Whatever your reasons for considering a trust , the right one can make all the difference . Understanding if trusts are right for you and their unique benefits is key to building a solid foundation for your legacy . Seek guidance from your financial planner , tax advisor , and most importantly your estate planning attorney who can serve as the point person in crafting the best strategy . After all , securing your future isn ’ t just about planning — it ’ s about peace of mind .
Alex Kim , CFP ® , MBA , CPA is an MMBB Financial Planning Specialist with more than 17 years of direct experience in the financial-planning field , and more than 20 years in the financial services industry . He holds the CERTIFIED FINANCIAL PLANNER ® certification , along with a CPA . He earned his B . A . in Accounting from Pace University and his MBA from Columbia University .
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