Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Irrevocable Trust Question
Old 02-09-2019, 09:39 AM   #1
Recycles dryer sheets
 
Join Date: Apr 2016
Location: warren
Posts: 327
Irrevocable Trust Question

Asking for my inlaws, my MIL is having health problems including early onset dementia. Things have progressed pretty quickly where it seems she may need to go into a facility.
I know there's a 5 year look back for assets/spending for nursing homes/memory care facilities. My question is, does this include irrevocable trusts? They had an I.T. done less than a year ago and are wondering if that money is safe? They seem to think it can't be touched, but it seems to me even that may be included in a 5 year look back otherwise why wouldn't everyone wait until something happens then get an I.T. done just before a loved one enters a facility?
Any help appreciated.
__________________

garyt is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 02-09-2019, 10:47 AM   #2
Full time employment: Posting here.
 
Join Date: Nov 2016
Location: Camas, WA
Posts: 566
What is the trust for? I know Medicaid allows you to set up an irrevocable trust for funeral expenses and won't count that as an asset (I think it's limited to $15K).

I would think any other trust would apply to the five year look back, but maybe I'm wrong.
__________________

mountainsoft is offline   Reply With Quote
Old 02-09-2019, 11:42 AM   #3
Thinks s/he gets paid by the post
 
Join Date: Jun 2017
Location: Western NC
Posts: 1,062
It's true those funds generally can't be touched, but Medicaid can impose a waiting period before they're eligible for benefits based on transfers to that trust within the 5 year "look-bacK" period.

I say generally because, IIRC, some states have enacted legislation that lets the state "bust" irrevocable trusts setup for Medicaid purposes so the state can get access to the trust principal to reimburse Medicaid
(in those states you'd want to make sure the trust was domiciled out-of-state)
ncbill is offline   Reply With Quote
Old 02-09-2019, 11:44 AM   #4
Full time employment: Posting here.
MissMolly's Avatar
 
Join Date: Jun 2010
Posts: 788
"....So while irrevocable trusts can protect assets from being counted by Medicaid (depending on whether the trustee has discretion to spend the assets), Medicaid will still count the transfer of the assets to the trust as a disqualifying transfer."

https://www.nolo.com/legal-encyclope...-medicaid.html
__________________
And whatever your labors and aspirations in the noisy confusion of life, keep peace in your soul. With all its sham, drudgery, and broken dreams, it is still a beautiful world. Be cheerful. Strive to be happy.- Desiderata by Max Ehrmann
MissMolly is offline   Reply With Quote
Old 02-09-2019, 12:09 PM   #5
Recycles dryer sheets
 
Join Date: Apr 2016
Location: warren
Posts: 327
Thanks, as I thought
garyt is offline   Reply With Quote
Old 02-09-2019, 02:21 PM   #6
Thinks s/he gets paid by the post
 
Join Date: Jan 2018
Location: Tampa
Posts: 2,853
Quote:
Originally Posted by MissMolly View Post
"....So while irrevocable trusts can protect assets from being counted by Medicaid (depending on whether the trustee has discretion to spend the assets), Medicaid will still count the transfer of the assets to the trust as a disqualifying transfer."

https://www.nolo.com/legal-encyclope...-medicaid.html
Interesting coz an irrevocable trust was set up for my parents and their lawyer insists that after the 5 year look back, the funds can't be taken by Medicaid.
I will look into this further.
__________________
TGIM
Dtail is offline   Reply With Quote
Old 02-09-2019, 02:31 PM   #7
Full time employment: Posting here.
MissMolly's Avatar
 
Join Date: Jun 2010
Posts: 788
Yes, after 5 years they are outside of the look-back period. The OP said it had been less than 1 year....
__________________
And whatever your labors and aspirations in the noisy confusion of life, keep peace in your soul. With all its sham, drudgery, and broken dreams, it is still a beautiful world. Be cheerful. Strive to be happy.- Desiderata by Max Ehrmann
MissMolly is offline   Reply With Quote
Old 02-09-2019, 02:33 PM   #8
Thinks s/he gets paid by the post
 
Join Date: Jan 2018
Location: Tampa
Posts: 2,853
Quote:
Originally Posted by MissMolly View Post
Yes, after 5 years they are outside of the look-back period. The OP said it had been less than 1 year....
Yes agree. I was referring more to your attached article. Will read it again.
__________________
TGIM
Dtail is offline   Reply With Quote
Old 02-09-2019, 04:04 PM   #9
Thinks s/he gets paid by the post
gauss's Avatar
 
Join Date: Aug 2011
Posts: 2,412
Agreed that funds put into an irrevocable trust will be uncountable by Medicaid once the five year clock has run its course - under current law.

IMHO there is nothing special about the irrevocable trust. It is just that the original party no longer has control/access to the funds. You could have given the funds to anyone and after 5 years they would not be countable.

Note that income distributed from the irrevocable trust paid to the original party would be countable each year towards Medicaid qualification.

It seems like the biggest advantage of an irrevocable trusts, at least for a single person, goes to the beneficiaries of the trust and not the original party. As such, I never approached DM about setting one up.

-gauss
gauss is offline   Reply With Quote
Old 02-09-2019, 04:22 PM   #10
Thinks s/he gets paid by the post
 
Join Date: Jan 2018
Location: Tampa
Posts: 2,853
Quote:
Originally Posted by gauss View Post
Agreed that funds put into an irrevocable trust will be uncountable by Medicaid once the five year clock has run its course - under current law.

IMHO there is nothing special about the irrevocable trust. It is just that the original party no longer has control/access to the funds. You could have given the funds to anyone and after 5 years they would not be countable.

Note that income distributed from the irrevocable trust paid to the original party would be countable each year towards Medicaid qualification.

It seems like the biggest advantage of an irrevocable trusts, at least for a single person, goes to the beneficiaries of the trust and not the original party. As such, I never approached DM about setting one up.

-gauss
There could be the "trusting" concept, in that giving the assets to children for example, things could go wrong.
In a trust setup, the children still have control, but if there is more than one trustee, then less possibility of issues.
On the negative side, the tax rates of a trust reach the top rate at very low incomes.
__________________

__________________
TGIM
Dtail is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Revocable and Irrevocable Trusts lem1955 FIRE and Money 16 06-25-2018 08:25 PM
Irrevocable Trust Corporate ORphan FIRE and Money 17 01-27-2015 02:49 PM
Rental property basis in trust vs. not in trust Dash man FIRE and Money 2 04-19-2014 08:20 AM
Irrevocable Trust for dad bigla FIRE and Money 6 12-03-2008 07:50 PM
Irrevocable Life Insurance Trust PsyopRanger FIRE and Money 9 10-25-2006 08:45 AM

» Quick Links

 
All times are GMT -6. The time now is 03:07 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2019, vBulletin Solutions, Inc.