What is an Irrevocable Trust?

In Nebraska, irrevocable trusts are often used for estate planning purposes to protect assets and ensure eligibility for government benefits such as Medicaid. An example of this is the "irrevocable supplemental needs trust" established for J.R.K. in the case of State v. Vanderford. This trust was designed to allow J.R.K. to keep her inheritance without losing her government benefits, with the Krotzes serving as cotrustees.

Under Nebraska law, an irrevocable trust is one where the trust's terms cannot be modified or terminated without the permission of the beneficiary or a court. According to DHHS regulations, if an irrevocable trust is established by an individual who is also a Medicaid applicant or recipient, the trust corpus will generally be included in the individual's resources for Medicaid eligibility purposes if there are any circumstances under which payment from the trust corpus could be made to or for the benefit of the individual.

However, there are exceptions to this rule. For instance, if the irrevocable trust is classified as a special needs trust or a pooled trust, the "any circumstances" test does not apply, and the trust corpus may not be counted as a resource for Medicaid eligibility.

Additionally, the Nebraska Uniform Trust Code allows for the modification or termination of a noncharitable irrevocable trust upon the consent of all beneficiaries, provided the modification is not inconsistent with a material purpose of the trust.

The Bottom Line:

Irrevocable trusts in Nebraska can be a valuable tool for estate planning, particularly for protecting assets and maintaining eligibility for government benefits. However, the specific terms and classification of the trust will significantly impact its treatment under Medicaid and other regulations.