New York Trusts Lawyer

What a Revocable Trust Accomplishes in New York

Probate avoidance: Assets held in a revocable trust at the grantor’s death pass to the named beneficiaries without going through the Surrogate’s Court probate process. New York’s probate process can be time-consuming — particularly for larger estates or those with disputed assets — and the court filing fees, publication costs, and attorney’s fees associated with probate can be significant. Assets in a revocable trust bypass this process entirely.

Incapacity planning: A revocable trust with a properly designated successor trustee provides a seamless mechanism for managing assets if the grantor becomes incapacitated. The successor trustee takes over without the need for a court-appointed guardian or conservator — which in New York would require an Article 81 guardianship proceeding in Supreme Court, a process that can be expensive and emotionally difficult for families.

Privacy: A will that is admitted to probate becomes a public record in the Surrogate’s Court. The trust document does not — trust administration is a private matter between the trustee and beneficiaries.

Multi-state property: For New York residents who own real property in other states, a revocable trust can hold title to those out-of-state properties and avoid the need for ancillary probate proceedings in each state where real property is owned.

What a Revocable Trust Does Not Accomplish

A revocable trust does not reduce New York estate tax. Because the grantor retains the power to revoke and regain control of the assets, the assets remain in the taxable estate for both New York and federal estate tax purposes. A revocable trust also does not protect assets from Medicaid spend-down — the same retained control that allows the grantor to amend the trust makes the assets countable for Medicaid eligibility purposes.

Funding the Revocable Trust

The most common mistake in revocable trust planning is creating the trust document but failing to transfer assets into it. An unfunded revocable trust provides none of the benefits described above. Funding requires:

• Retitling real property through deeds recorded with the county clerk
• Changing ownership of bank and investment accounts to the trustee
• Updating beneficiary designations on retirement accounts and life insurance to direct assets to the trust (if appropriate)
• Maintaining a “pour-over will” that directs any assets inadvertently left outside the trust into the trust at death

Seraj Law handles the trust funding process — not just the trust document — including drafting and recording deeds and preparing account transfer instructions.

How a MAPT Works

The grantor transfers assets — most commonly a home, investment accounts, or bank accounts — to the irrevocable trust. The grantor retains the right to receive all income generated by the trust assets during their lifetime (interest, dividends, rent). Crucially, the grantor gives up the right to access the principal of the trust. Because the grantor cannot demand return of the principal, it is not a countable resource for Medicaid purposes.

At the grantor’s death, the trust principal passes to the named remainder beneficiaries — typically the grantor’s children — without probate. The trust avoids the full Medicaid estate recovery claim that would attach to assets owned outright by the decedent (subject to specific rules about MAPT and estate recovery that require legal analysis).

The Five-Year Look-Back

New York applies a five-year look-back period to Medicaid applications for nursing home coverage. Any transfer made within five years of the application date is scrutinized and creates a penalty period — a period during which Medicaid will not pay for care, calculated by dividing the transferred amount by the monthly average cost of nursing home care in New York. The penalty period can be substantial for large transfers.

Assets transferred to a MAPT more than five years before the Medicaid application are generally not subject to the look-back penalty. New York’s Medicaid eligibility rules govern how transferred assets are treated during the lookback period. This means a MAPT must be created and funded well in advance — the “right time” to plan is before a health crisis makes the issue urgent.

What Can Go Into a MAPT

Real property (particularly the family home) is the most common MAPT asset in New York. Investment accounts, savings, and other non-retirement assets can also be transferred. Retirement accounts (IRAs, 401(k)s) generally cannot be transferred to an irrevocable trust without triggering a taxable distribution and are typically addressed through separate planning strategies. Medicaid’s treatment of retirement accounts is complex and requires individualized analysis.

Third-Party SNTs

A third-party SNT is funded by someone other than the beneficiary — a parent, grandparent, or sibling who wants to leave assets to a family member with disabilities without affecting their benefits. Under New York law, a third-party SNT does not require Medicaid payback at the beneficiary’s death — the remaining trust assets can pass to other family members. This is a key advantage over first-party trusts.

First-Party (d4A) SNTs

A first-party SNT, established under 42 U.S.C. § 1396p(d)(4)(A), holds assets belonging to the beneficiary — typically litigation settlements, inheritances received outright, or personal injury awards. To qualify, the trust must be established by a parent, grandparent, legal guardian, or court for a beneficiary under 65. New York law requires Medicaid payback at the beneficiary’s death from any remaining trust assets.

Pooled Trusts

New York has approved several non-profit organizations to administer “pooled trusts” — supplemental needs trusts managed by a non-profit trustee with subaccounts for individual beneficiaries. Pooled trusts are available for beneficiaries of any age, including those over 65 who cannot establish a first-party d4A SNT. They are often appropriate for smaller trust amounts where the cost of a standalone trust is disproportionate.