Funding Your Irrevocable Trust

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Question:  My mother has a trust that is supposed to protect her assets in case she needs Medicaid in the future.  How do assets get into a trust, I am confused.

Answer:  In order for an asset to be owned by a trust, there must be a transfer. The five year look back for Medicaid does not even begin to run until the month after the asset is put in the trust.  That is true for each and every asset transferred.  So, if you transfer a deed in January 2020, the five year period begins to run on February 1 and ends on January 31, 2025.  If you put another asset in the trust in March 2021, the look back period begins April 1, 2021 and ends on March 31, 2026.   That penalty period is just for the new assets transferred in March, not for all the assets in the trust.

The method of placing assets in the trust depends upon the type of asset.  If you are putting monies from a savings account into the trust then the Trustee must open the trust account.  Once the account is open you can remove the savings from your account and deposit in the Trust account.  This will probably require the Trustee to go to the bank to create a trust account.  If the asset is a life insurance policy, then you will be requesting change of ownership and change of beneficiary forms from the insurance company and name the trust as the new owner.  If you are putting real property in the trust then your attorney should prepare a deed transferring the property from yourself to your trust.  If you are putting brokerage accounts in the trust then your Trustee will have to open up a brokerage account in the name of the trust.  After the account is created, you can instruct your broker to transfer the account to your trust.  Automobiles transferred to a trust will have to change the DMV Title to name of the trust as owner.

It is very important that you take the time to fund your trust and do so correctly. The sooner you put the assets in the trust, the sooner the five year look back will begin.  Please note retirement funds: IRA’s, 401K’s and 403B’s are usually not transferred to the trust because of adverse tax consequences.  Consult with a trusted advisor.  The attorney who prepared your trust should be ready and able to assist.

Nancy Burner, Esq.

Burner Law Group, P.C.

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