Should you consider asset protection planning?
The Use of Irrevocable Medicaid Income Only Trusts
Question: Who would consider using these Medicaid irrevocable trusts?
Answer: While there is no hard and fast rule as to who can use these trusts, it is generally recommended to folks who have attained 60 years of age or older. In addition, you should consider using these irrevocable trusts if in fact one of your objectives in the estate and elder law planning world is to protect assets from the cost of long term care. In the event this type of asset protection planning is not important to you, then a revocable trust would be the recommended vehicle for your estate planning needs. Finally, if you happen to be under age 60 but have a diagnosed mobility related illness, then of course you could consider the use of these irrevocable trusts as well.
Question: Who can be the Donor of these irrevocable trusts and what does that mean?
Answer: The Donor is referred to as the individual who creates the trust.The Donor may also retain certain powers over the trust, most importantly, the power to remove and replace a trustee at any time for any reason, provided, however, that the replacement trustee can never be the Donor of the trust. This retained power by the Donor allows the Donor to retain a significant degree of control over the operation of the trust, even though the Donor does not serve as trustee. In addition, the donor will also be an income beneficiary of the trust.
Question: Who can be the trustee of these irrevocable trusts?
Answer: Often times, the Donor would like to serve as trustee of the trust thereby significantly increasing the Donor’s control over the operation of the trust assets during the Donor’s life. There is support for this position in Massachusetts where there is a case entitled Ledger vs. Department of Medical Assistance in which the Court indicated that, while this may appear to be an unappetizing maneuver, it nonetheless fails to contravene any rule or regulation. However, there has since been another case known as the Muriel Doherty case in which the Appellate Court in Massachusetts indicated that the irrevocable trust was not drafted properly and provided too much control to the Donor, whereby causing the assets of the trust to be at risk. Therefore, it is the recommendation of this author that, if the Donor of the trust has children or trustworthy family members, that they serve as trustee and that the Donor relies on his or her power to remove and replace the trustee, as mentioned above, in order to provide a comfort level when implementing these irrevocable Medicaid trusts.
Todd E, Lutsky, Esq. LLM
Cushing & Dolan, P.C.
Attorneys At Law
Totten Pond Road Office Park
375 Totten Pond Road, Suite 200
Waltham, MA 02451
Securities offered through Securities America Inc., Member FINRA/SIPC and advisory services offered through Securities America Advisors, Inc. Armstrong Advisory Group, Cushing & Dolan, WRKO and The Securities America Companies are unaffiliated. Representatives of Securities America Inc. do not provide legal or tax advice. The scenarios provided are for illustrative purposes only and not intended to represent client experiences of Armstrong Advisory Group or the Securities America companies. Please consult with a local attorney or tax advisor who is familiar with the particular laws of your state. January 2013
Securities offered through Securities America, Inc. Member FINRA / SIPC. Advisory Services offered through Securities America Advisors, Inc., an SEC Registered Investment Adviser. Armstrong Advisory Group and the Securities America companies are unaffiliated.
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