Under Indiana law, a trust is a fiduciary relationship between two people: a trustee, who holds title to property; and a beneficiary, the person for whom it is held. A trust allows an individual (known as the grantor) to manage his or her assets in a separate entity that that can only be controlled by a named trustee. The trustee can only manage and distribute the trust in accordance with what the grantor describes in the trust. Trusts can be used to reduce tax burdens and avoid probate. In practice, there are two types of trusts: a revocable trust and an irrevocable trust.
A revocable trust is one in which the grantor can change the terms of the trust, or terminate the trust entirely. Additionally, in a revocable trust, property is transferred to the beneficiaries of the trust only after the death of the grantor. In contrast, an irrevocable trust is one which its terms cannot be changed or terminated without permission from the grantor’s named beneficiaries.
Revocable trusts have the advantage of flexibility and allow the grantor to add or remove beneficiaries and modify how assets within the trust are managed. However, assets in a revocable trust can be subject to claims of creditors, as well as state and federal taxes.
Once a grantor places his or her assets in an irrevocable trust, he or she relinquishes all control and ownership of the assets. This can be crucial in protecting those assets from creditors or, if you are considering Medicaid eligibility for nursing home care, the government.
This McNeelyLaw LLP publication should not be construed as legal advice or legal opinion of any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own lawyer on any specific legal questions you may have concerning your situation.