Trustees of Irrevocable Trusts can buy and sell property held in the trust, it is a common Trustee power included in a trust. There are, of course, different types of irrevocable trusts. An Irrevocable Trust created for the purpose of protecting assets from the cost of long term care is commonly referred to as Medicaid Asset Protection Trust (“MAPT”). This is because Medicaid is the primary payor of nursing home costs in the United States. In order to be eligible for Medicaid, the applicant would need to meet certain income and asset requirements. Therefore, in order to protect assets to qualify for Medicaid, the Grantor, or the trust creator, would transfer assets into the trust before they need care and if those assets remain in the trust for five years, they would be considered unavailable for Medicaid eligibility purposes. This five-year “look back” refers to the time period that Medicaid will examine an applicant’s finances in order to determine their eligibility. So long as transfers were made more than five years in advance of needing the care, no penalty will result.
Grantor’s Control Over Residences in Medicaid Qualifying Trusts
Many people hear the word “irrevocable” and believe that once they have transferred assets into an irrevocable trust, they will lose complete control of their property. However, Medicaid qualifying irrevocable trusts can, and should, be drafted to allow the Grantor to maintain some control over assets in the trust. For example, the Grantor can change the trustee, change beneficiaries and even take property out of the trust so long as the beneficiaries agree. But, since the Grantor is allowed to change the trustee at any time, if the trustee is blocking the Grantor, he or she can be replaced. This allows people to protect assets without feeling that they have given up complete autonomy.
How to Sell a Property in Trust to Buy a New Property
In addition to the powers listed above, the Grantor can direct their trustee to sell their residence that is in the trust and use the money received to purchase another property of their choice. This should be accomplished by the Trustee selling the house already in trust, depositing the money received from the sale into a bank account in the name of the trust and then using the trust funds in that bank account to buy a new property. Because the house was never taken out of the trust, and the proceeds were used to buy a new property, the Grantor will not have lost the two years of protection that they earned while the first house was in trust.