What Is an Irrevocable Trust in New York?

The word "irrevocable" stops people cold. They hear permanence and assume risk. What they should hear is protection. An irrevocable trust is the legal tool that puts assets genuinely beyond your creditors, beyond Medicaid's reach, and in many cases beyond estate tax. The trade-off is real — you give up direct control. Whether that trade-off makes sense depends entirely on what you're trying to accomplish.

Revocable vs. Irrevocable: The Fundamental Difference

A revocable living trust is flexible and convenient. You control it. You can change it, take assets out, add assets, revoke it entirely. That flexibility comes at a cost: for legal purposes, the assets in a revocable trust are still yours. Creditors can reach them. Medicaid counts them. They're included in your taxable estate.

An irrevocable trust works differently. When properly structured, you no longer own the assets you've transferred into it. You've permanently given them up — to the trust. That legal separation is what creates protection. Medicaid can't count assets you don't own. Creditors generally can't reach assets you've legitimately transferred away. And assets not in your taxable estate don't face New York or federal estate tax.

The sacrifice is control. You can't simply take the assets back. You can't change the trust terms on a whim. The trustee — who may be a family member or professional but isn't you — controls distributions. That's the deal, and it needs to be understood clearly before anyone creates an irrevocable trust.

The Main Types of Irrevocable Trusts in New York

There isn't one irrevocable trust — there are many, each designed for a specific purpose. The right one depends entirely on your goals.

Medicaid Asset Protection Trust (MAPT)

The most common irrevocable trust for New York families focused on elder care planning. A Medicaid Asset Protection Trust transfers assets — typically the family home and savings — out of the grantor's estate to protect them from being counted in a Medicaid eligibility determination. Once assets have been in a properly structured MAPT for five years, they're fully protected from Medicaid's asset limit rules (the "look-back period").

New York's Medicaid look-back period is five years for nursing home (institutional) Medicaid. Any transfer made within five years of applying for nursing home Medicaid is subject to a transfer penalty — a period of ineligibility calculated by dividing the transferred amount by the average monthly nursing home cost (approximately $13,000-$14,000 per month in New York City in 2025). The math matters enormously: a $300,000 home transferred the day before a nursing home admission creates a roughly 22-month penalty. The same transfer made five years and one day before application creates no penalty at all.

The grantor cannot serve as trustee of their own MAPT. Common choices are an adult child, a trusted friend, or a professional trustee. The grantor can retain the right to income from assets in the trust (though not the principal), the right to live in the home transferred to the trust (a retained life estate or a right of occupancy), and the right to change the beneficiaries of the trust.

One important tax consideration: assets transferred to a MAPT during life receive a carryover cost basis — the grantor's original basis carries over to the beneficiaries. If the family home is transferred to a MAPT and later sold by the beneficiaries after the grantor's death, capital gains tax may apply on appreciation from the original purchase price. Assets received through inheritance at death, by contrast, receive a stepped-up basis to fair market value at the date of death. This basis issue needs to be factored into MAPT planning, particularly for homes with significant appreciation.

Irrevocable Life Insurance Trust (ILIT)

Life insurance owned by the insured is included in the insured's taxable estate. For large estates, this can mean a $2 million life insurance policy adds $2 million to the estate tax calculation — costing the estate $320,000 or more in New York estate tax (New York's top marginal rate is 16%).

An ILIT solves this problem by owning the life insurance policy outside the insured's estate. The insured gifts premium payments to the ILIT (using Crummey notices to qualify them as annual exclusion gifts), the trust pays the premiums, and when the insured dies, the death benefit passes to the ILIT beneficiaries entirely free of estate tax. For large estates, the estate tax savings from an ILIT can easily justify the modest administrative complexity it involves.

Spousal Lifetime Access Trust (SLAT)

A SLAT allows a married person to make a large gift to an irrevocable trust for the benefit of their spouse (and potentially children), removing the assets from the grantor's taxable estate while the spouse retains access to distributions. The grantor gives up the assets — they're in the trust, not in the grantor's estate — but the family's lifestyle is protected because the spouse can receive distributions.

SLATs are particularly popular when federal estate tax exemptions are set to decrease. The current federal exemption is $13.99 million per person in 2025, scheduled to drop roughly in half in 2026 unless Congress acts. Funding a SLAT now locks in today's higher exemption on the transferred amount — even if the exemption later drops. The IRS has confirmed that gifts made under today's higher exemption won't be "clawed back" after a reduction.

The reciprocal trust doctrine requires careful structuring: spouses cannot create mirror-image SLATs for each other. If they do, the IRS can treat each trust as if the grantor spouse is the beneficiary of their own trust, defeating the estate tax benefit.

Qualified Personal Residence Trust (QPRT)

A QPRT transfers a personal residence to an irrevocable trust while the grantor retains the right to live in the home for a fixed term — say, 10 or 15 years. At the end of the term, the home passes to the beneficiaries (typically children). The taxable gift is the remainder interest, valued at a significant discount because the beneficiaries won't receive the home until the term ends. If the grantor outlives the term, the full value of the home — including all appreciation that occurred after the transfer — is out of the taxable estate.

QPRTs work best when real estate values are rising and interest rates are low (lower rates mean larger valuation discounts). For a New York City property worth $2 million, a properly structured QPRT with a 10-year term might produce a taxable gift of $800,000-$1,000,000 while transferring the full appreciated value to children entirely free of estate tax.

Charitable Remainder Trust (CRT)

A CRT is an irrevocable trust that provides income to the grantor (or another named beneficiary) for a fixed term or for life, with the remainder passing to a designated charity at the end of the term. The grantor receives an immediate charitable deduction for the present value of the remainder interest. Appreciated assets transferred to a CRT can be sold without immediate capital gains tax — the trust sells tax-free, reinvests the full proceeds, and generates a larger income stream than the grantor would have received after paying tax on a direct sale.

Irrevocable Trusts and New York Estate Tax

New York's estate tax applies to estates exceeding $7.16 million in 2025, with a top rate of 16% and a brutal cliff provision — estates between 100% and 105% of the exemption pay tax on the full estate value, not just the excess. For New York residents with estates in this range, irrevocable trust planning isn't academic. It's a real strategy that saves real money.

Assets transferred to an irrevocable trust more than three years before death (for life insurance policies) or generally at the time of transfer (for other assets) are removed from the New York taxable estate. Combined with the lack of a New York gift tax — New York imposes no state gift tax — lifetime transfers to irrevocable trusts are one of the most effective tools for reducing New York estate tax exposure.

For more on the New York estate tax landscape, our 2026 New York estate tax guide covers current exemptions, rates, and planning strategies in detail.

Creditor Protection Through Irrevocable Trusts

Assets in a properly structured irrevocable trust are generally beyond the reach of the grantor's future creditors — provided the transfer wasn't made with intent to defraud existing creditors (which constitutes a fraudulent conveyance under New York Debtor and Creditor Law). The earlier in life these transfers are made, the more genuine the protection.

This protection is particularly relevant for professionals in high-liability fields — physicians, attorneys, architects, contractors — and for business owners whose personal assets might otherwise be at risk from business liabilities. Transferred assets must be legitimately beyond the grantor's control; trusts where the grantor retains too much control over distributions are vulnerable to creditor attack.

What You Give Up With an Irrevocable Trust

The protections of irrevocability come with real trade-offs that must be understood before transferring assets:

• Control: You can't take assets back. You can't change the trust terms unilaterally. You're dependent on the trustee to make appropriate distributions.
• Basis step-up: Assets transferred to irrevocable trusts during life don't receive a stepped-up basis at death in most structures. This matters for highly appreciated assets that will eventually be sold.
• Flexibility: Life changes — divorce, estranged children, changed financial circumstances — are harder to accommodate in an irrevocable structure.
• Medicaid look-back period: Transfers to irrevocable trusts for Medicaid protection are subject to the five-year look-back period. Planning must begin well in advance of anticipated nursing home need.

None of these drawbacks are disqualifying. They're factors to weigh against the protection benefits. Most clients who transfer a home to a MAPT and then successfully qualify for Medicaid five years later would tell you the trade-off was completely worth it. But it requires planning with clear eyes about what irrevocability actually means.

For Medicaid-specific planning strategies beyond the MAPT, our complete Medicaid planning guide and our article on New York's Medicaid look-back period provide detailed guidance. For nursing home cost protection strategies, see our guide to protecting assets from nursing home costs. And for help deciding between a revocable and irrevocable trust, our comparison of living trusts vs. wills is a useful starting point.

Additional resources on irrevocable trusts in New York are available at Morgan Legal NY's irrevocable trust resource page.