[WSBAPT] Trusts to Protect Assets from Medicaid

Tue Nov 17 11:22:49 PST 2015

One problem I see is that, all things being equal and favorable to the grantors, the trust income tax rate is so high that income has to be distributed out which may not be desirable.  Thus,  if there are income producing assets and the grantors are reporting the income but not drawing it down (ie, leaving it in the trust to accumulate) you have a situation where there is at a minimum an annual gift back, and therefore, a future commingling issue.  I suppose grantors can draw it down and gift it to another family member who can contribute it, but that is cumbersome.  I suppose that the trust can also distribute income to other named family beneficiaries who gift it to the primary parental beneficiaries, but this too is cumbersome.  

From: Jim Doran 
Sent: Tuesday, November 17, 2015 10:53 AM
To: WSBA Probate & Trust Listserv 
Subject: Re: [WSBAPT] Trusts to Protect Assets from Medicaid

Thank you, Krista.  I will get in touch with David if I do not get much feedback here.  I am sure there are lots of nuances like the "life estate" issue that I will learn about as we go.

Jim 

James R. Doran

Attorney at Law

100 E. Pine Street -  Suite 205

Bellingham, WA 98225
(360)393-9506

jim at doranlegal.com

www.doranlegal.com

On Tue, Nov 17, 2015 at 10:41 AM, Krista MacLaren <kjm.inc at mac.com> wrote:

  Hi Jim, 

  I was just at an NBI Elder Law CLE on this topic last Friday, and one of the very informed speakers said at some point, don’t use life estates.  Unfortunately I don’t know exactly what he was saying, because I had missed much of the day’s speakers and wasn’t following the discussion very well.  If folks on the list don’t have the answer, you could check with David Kazemba in Wenatchee, the speaker.

  Krista J. MacLaren
  Attorney at Law
  Northgate Executive Center II
  9725 3rd Ave NE, Suite 600
  Seattle, WA 98115
  (206)523-6116
  kjm.inc at mac.com

  Please note, as with most email providers, Mac does not encrypt email messages.  Accordingly, the confidentiality of messages sent to this address cannot be assured.  This e-mail is intended for viewing only by the individual or entity to whom its content is addressed, and it may contain confidential or privileged information.  If you received this email in error, please honor the privacy of the intended recipient: reply to the sender regarding the error and delete the message. 

    On Nov 17, 2015, at 10:22 AM, Jim Doran <jim at DORANLEGAL.COM> wrote:

    Hello Listmates:

    I know this is a common question and I also know that there is tension in the law regarding how and even "if" this can be done.  I have a client that is asking the question in a pretty straightforward manner.  I think this issue goes to the lack of progress in our society concerning health care and dying.

    H & W, both in their early 70s, want to put their significant assets, two pieces of real estate and probably a third very valuable one that they will receive as an inheritance from mother, into a trust to protect them from the Medicaid asset requirements for eligibility and from the spend-down and recoupment provisions of medicaid.  I would imagine the protection from creditors in general is also part of the concept.

    The concept is to put the assets into an irrevocable trust that gives them a life estate in the property they choose to live in.  The trust would direct that the remainder at the death of the second trustor would go to the children in a typical scheme.  H & W would keep some assets, such as investment funds and some cash and regular monthly income, out of the trust to live on.  Those assets would not be protected.

    One question for them is, who will be the Trustee?  This is an irrevocable trust so you better choose wisely.

    For me, the question is whether this can be done at all and how it can be done.  I am aware of the five year look-back provisions so we want to do this asap.

    I do have access to the desk books and other library sources.  If someone can point me in the right direction, give me the right name for this kind of trust, or send me a model, it would be appreciated.

    Jim Doran

    James R. Doran

    Attorney at Law

    100 E. Pine Street -  Suite 205

    Bellingham, WA 98225
    (360)393-9506

    jim at doranlegal.com

    www.doranlegal.com

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