By: Lisa Hostetler Brown, Managing Attorney, LawyerLisa
Expert Answer: (Hint: It might not be Johnny!)Setting up an irrevocable trust is often a smart and effective way to protect your assets from long-term care costs, especially when pre-planning for Medicaid eligibility. However, this strategy works only if you choose the right Trustee to manage the trust. Selecting the Trustee is a crucial decision that requires careful thought and consideration because you’re entrusting someone with significant legal responsibility.
First, it’s important to understand that you cannot serve as the Trustee of your own irrevocable trust. Doing so would mean you retain control over the assets, which defeats the purpose of the trust in protecting those assets from Medicaid’s reach. Instead, someone else, who you choose, must take on the role of managing the trust’s assets and ensuring that they are used according to the terms you’ve established.
Ideally, your Trustee should be someone trustworthy, responsible, and willing to follow professional legal guidance. This is often a close relative, like a financially savvy adult child or a family member with experience in managing money or business affairs—such as a CPA daughter or a reliable sibling. A trusted family friend with strong financial knowledge and integrity could also be a good choice.
On the other hand, avoid choosing someone who has a shaky track record or questionable judgment. If “Johnny” just got sober or is still figuring things out in life, he’s probably not the best fit to take on such a critical role. The Trustee doesn’t need to be a financial expert or lawyer, but they must be honest, communicate well, and be willing to work closely with your elder law attorney to follow your overall estate plan.
To put it simply, the Trustee’s job is to act responsibly and follow professional advice, not to have all the answers immediately. A good Trustee will collaborate with attorneys and financial advisors, ensure that distributions are made according to your wishes, and keep accurate records. This helps maintain the trust’s legal protection and prevents any unintended complications that could jeopardize your Medicaid eligibility or your family’s financial security.
It’s also helpful to understand how an irrevocable trust differs from a revocable trust. With a revocable trust, you retain control over the assets and can modify or revoke the trust at any time. This type of trust is great for probate avoidance and general estate planning, but it does not protect assets from Medicaid because you still legally own them. In contrast, an irrevocable trust removes ownership and control, which is why Medicaid cannot count those assets when determining eligibility. However, it also means you cannot change or dissolve the trust without the Trustee’s cooperation and, sometimes, court approval.
Additionally, when planning for incapacity or emergencies, a Power of Attorney (POA) is another key tool. Unlike a Trustee, your POA agent manages your financial and legal matters only if you become unable to do so yourself. It’s important to designate someone trustworthy here, too, as they’ll have significant control over your finances and decisions. The POA can work in tandem with your Trustee, helping manage assets not placed in the trust or handling other legal matters.
Ultimately, your trust and POA are only as strong as the people you choose to serve in those roles. Choosing the right Trustee and agent can provide peace of mind and real protection for your assets and your future care needs. Take the time to pick someone responsible, reliable, and willing to honor your wishes — it’s one of the most important decisions you’ll make in your elder law planning.