Irrevocable Trust Question

[garyt]

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.

 

[mountainsoft]

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.

 

[ncbill]

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)

 

[MissMolly]

"....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-encyclopedia/are-revocable-irrevocable-living-trusts-useful-qualifying-medicaid.html

 

[garyt]

Thanks, as I thought

 

[Dtail]

"....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-encyclopedia/are-revocable-irrevocable-living-trusts-useful-qualifying-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.

 

[MissMolly]

Yes, after 5 years they are outside of the look-back period. The OP said it had been less than 1 year....

 

[Dtail]

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.

 

[gauss]

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

 

[Dtail]

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.