We hope you enjoyed our 35th Anniversary Series!
At Makofsky Valente Law Group, we spend a lot of time answering clients’ questions. This week, we’re addressing a common question:
Q: Can I serve as the trustee of an irrevocable trust that I create?
A: It depends on the type of irrevocable trust and the purpose for which it is being established.
Not all irrevocable trusts are the same. Some are designed to protect assets from creditors, including Medicaid, while others are intended to reduce estate taxes by removing assets from a taxable estate.
Although it is generally legal for the creator (grantor) of an irrevocable trust to serve as trustee, doing so is often not advisable. In certain circumstances, creditors or taxing authorities—such as Medicaid, the IRS, or the New York State Department of Taxation and Finance—may view a grantor-trustee as retaining too much control over the trust assets. This could undermine the very protections or tax benefits the trust was intended to provide.
Better Planning Options
Rather than serving as trustee yourself, consider appointing an independent trustee, such as:
- A trusted family member, such as an adult child or sibling
- A close friend
- A professional advisor, such as a CPA, financial advisor, or attorney
- A corporate trustee, such as a bank or trust company
In addition, a properly drafted trust can allow you to retain certain rights and protections without serving as trustee. For example, you may be given the power to remove and replace a trustee or exchange trust assets for assets of equal value, providing flexibility while preserving the trust’s intended benefits.
The Bottom Line
Because every irrevocable trust is different, there is no one-size-fits-all answer. Careful planning is essential to ensure your trust is structured to achieve your goals while providing the level of comfort and control that is appropriate for your situation.
If you are considering establishing an irrevocable trust, our experienced team can help you evaluate your options and design a plan that works for you. Contact us today to schedule a consultation.
