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What is the Difference between a Valid and an Effective Trust?

by Jeffrey Asher, Estate Planning Expert
April 26, 2017

Question: My mother’s attorney mentioned something about a valid trust being different from an effective one. What is the difference?

Answer: The attorney was correct.  However, while it is true that there is a difference between a valid trust and an effective trust, the difference is small and usually not a critical one.
 
Generally, and depending on the specific state law at issue, for a trust to be valid, it must:  (a) be created by someone with legal capacity who is a legal adult, (b) be signed in accordance with the law, (c) properly identify the assets to be governed by the trust agreement, (d) properly identify the trustee(s) who will be in charge of managing the trust assets and administering the terms of the trust, and (e) have clear instructions to the trustee(s) for how the trust assets are to be managed and how the terms of the trust are to be administered.
 
An effective trust, on the other hand, is one which, although valid, may not do what the creator of the trust intended it to do.  In other words, if the language of the trust does not accomplish the goals and intentions behind the creation of the trust, then we say it is not an effective trust.  For example, if the purpose of the trust is to protect assets from Medicaid, but the reality is that the language of the trust does not protect assets from Medicaid, then the trust is not effective.  If the purpose of the trust is to avoid probate, but the trust does not help the creator of the trust avoid probate, then the trust is not effective.  If the purpose of the trust is to protect assets for the benefit of a minor or disabled beneficiary, but the protections don’t work, then the trust is not effective.  The list can go on, but the point is that a trust needs to be both valid and effective for it to work. 
 
If it turns out that the trust you created is not effective – meaning, it’s not doing the things you expect it to do, there may be something you can do to fix that.  Depending on state law, your attorney may be able to amend the language of the trust to make it effective or your attorney may be able to re-do the trust using the correct language.
 
If you have a concern over the validity and/or effectiveness of your trust, then you should make an appointment with a qualified attorney – either a Trusts & Estates or Estate Planning attorney or an Elder Law attorney – and have him or her review the terms of the trust and whether the trust was created properly.

Jeffrey Asher is a prominent Trusts & Estates and Elder Law attorney in Westchester County and New York City. Mr. Asher concentrates primarily in the areas of Estate Planning, Probate and Estate Administration, Elder Law, Medicaid Planning, and Special Needs Planning. Mr. Asher provides comprehensive legal services, tailored to meet your specific needs.

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