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Irrevocable Trust For Medicaid Eligibility Boston Medicaid Planning

Irrevocable Trust For Medicaid Eligibility Boston Medicaid Planning





Boston Elder Law Attorney Cohen and Oalican, LLP, explains the impact of an irrevocable Trust when planning for Medicaid Eligibility



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    Irrevocable Trust For Medicaid Eligibility Boston Medicaid Planning Irrevocable Trust For Medicaid Eligibility Boston Medicaid Planning Presentation Transcript

    • IRREVOCABLE TRUST For Medicaid Eligibility Boston Elder Law Attorneys Specializing in Medicaid Planning Cohen & Oalican, LLC 617-263-1035- Boston 508-821-5599 – Raynham 978-749-0008 - Andover
    • Irrevocable Trust, Preamble  Your irrevocable trust will protect the trust assets should you or your spouse ever apply for MassHealth nursing home benefits.  MassHealth will only consider the trust assets to be “non-countable” if your access and rights to the trust property are limited.  Please review this presentation carefully so that you and the trustee understand how the trust will work and your obligations and rights to the trust property.
    • Irrevocable  The trust is irrevocable, meaning that you cannot change it.  You have no right to demand that the trust assets be returned to you.  The trust does, however, contain language which allows you to appoint a new trustee.  The trust also gives you a power of appointment. This means that you can change the interests of the beneficiaries upon your death by changing your will.  Once you place an asset into your irrevocable trust you no longer own it, the trust does.  However, you can still benefit from the trust asset in many ways.
    • Principal and Income  By the terms of the trust, none of the trust principal can be paid to you under any circumstances.  This is critical in order to make sure that the trust assets are protected from MassHealth.  Think of your trust like a locked safe.  Although assets placed into the trust must remain in the trust, they can be sold.  For example, if real estate is placed in the trust and it is subsequently sold, the proceeds from the sale must remain in the trust.  Likewise, the trustee could be use the proceeds to purchase a new home for you. However the new home would be titled in the name of the trust.  You also have a continuing right to live in real estate owned by the trust.  Additionally, the interest and dividends earned on the trust property or rental income can be paid out to you.  Because you no longer own the property held in the trust, you will most likely not be able to mortgage or take out an equity loan on the property.
    • Medicaid Eligibility  By transferring assets into this trust, you have made yourself and your spouse ineligible for MassHealth for the next five years.  It is critical that you not file a MassHealth application until the five-year “lookback period” has passed.  If you apply too soon, you may make yourself and your spouse ineligible for MassHealth benefits for a period exceeding five years.  Should you or your spouse require nursing home care within the next five years, you should contact our Boston Attorney office Specializing in Medicaid Planning and Irrevocable Trusts so we can advise you how best to proceed
    • Taxes  The trust is written so that if your home or other appreciated assets are sold after your death, you heirs will receive what is called a “step-up” in the tax basis.  This means that the ultimate beneficiaries of the trust will pay little or no capital gains taxes if they decide to sell property after your death.  If your primary residence is owned by the trust and it is sold while you are alive, you will be able to utilize your $250,000, or $500,000 in the case of couples, capital gains exclusion.  The trust property will be included in your taxable estate.  A Massachusetts estate tax will only be owed upon the surviving spouse’s death if your total estate (including the trust assets) exceed $1 million.
    • Taxes, con’t  If you have only placed real estate into your irrevocable trust, you can continue to file your annual income taxes as you have in the past.  Accordingly, you will not need a new tax identification number for the trust.  Further, you will still be able to claim any deductions related to your home on your taxes.  If you have placed liquid assets into your trust, you will need to apply for a new tax identification number (EIN) and file an annual trust tax return.  The trust is drafted so that all the income earned on the trust assets will be taxable to you.  You should contact your accountant who will need to complete the necessary tax forms for the trust.
    • Probate  Any property held in the trust will avoid the probate process and pass directly to the beneficiaries named in your trust.  Should you ever wish to change the beneficiaries of the trust, please contact our Boston Medicaid Planning Attorney’s so we can assist you further.
    • Other Implications  Placing your home into an irrevocable trust may cause you to lose any tax abatements you may currently receive.  If you have recorded a homestead on your primary residence and then subsequently transfer your home into the trust, you may lose the protection afforded by the homestead.  If you currently have a mortgage on your property, it may technically become due upon transferring the property into an irrevocable trust.  Our Boston Elder Law Attorneys recommend that you inform your insurance company that your trust is the owner of your home.  Your insurance company should change the home owner’s policy to reflect that the trust is the new owner.
    • Boston Elder Law Attorneys Specializing in Medicaid Planning Cohen & Oalican, LLC 617-263-1035- Boston 508-821-5599 – Raynham 978-749-0008 - Andover