Is it true that an irrevocable trust does not take effect for five years?
My friend is in the terminal stage of lung cancer. She has already set up an "irrevocable trust" and was recently told that it would not be in effect for five years. We are hoping to have at least another six months with her, is that rumor true or does she need to find another avenue to explore while she is still capable?
Get some peace of mind for your friend during her final months by finding the original trust document. Concentrate on her concerns -- and how you can help relieve them.
There is no blanket rule that irrevocable trusts do not become effective for five years, but there are many different kinds of trusts, with possible twists and turns to each, depending on the way they're written. There is a five-year rule that applies to trust transfers and Medicaid eligibility, which may be where the information you got originated. That rule specifies that transfers into an irrevocable trust with an independent trustee, made more than five years before applying for Medicaid, would protect those assets by keeping them out of the reach of the applicant.
In the most common arrangements, irrevocable trusts will simply specify:
- The assets to be placed in trust.
- Instructions for how they should be managed and distributed.
- The person or institution to serve as trustee, managing the assets according to trust provisions.
And in most cases, the person who makes the trust will name himself or herself as trustee to have and hold the property while alive. If after reviewing the document, questions remain about how and when it takes effect, encourage your friend to consult with the attorney who drew it up if there was one. He or she should agree to do this simple consultation free of charge.
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